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Today’s Notable Sentiment ShiftsUSD – The dollar hit highs not seen in more than four months against the euro, as investors speculated further over whether recent strong jobs data could be enough to push the Federal Reserve to soon start tapering its bond-buying program. Bannockburn Global Forex argues that “the dollar is well bid, and it’s been well bid since the middle of last week. A combination of hawkish comments from several Federal Reserve officials and the second monthly increase of more than 900,000 jobs has reaffirmed what the market has suspected, and that is for a tapering decision to be made shortly.” GBP – Sterling rose to an 18-month high against the euro, as signs of economic recovery and falling COVID-19 rates spur expectations of a far earlier interest rate lift-off compared to the Eurozone.
TVC:DXY
by thunderpips
3
GBP JPY BUY (POUND STERLING - JAPANESE YEN)GBP FUNDAMENTAL BIAS: BULLISH 1. Virus Situation The successful vaccination program has allowed the UK to open up faster and sooner than peers & provides a favourable environment for GBP. 2. The Monetary Policy outlook for the BOE The BoE meeting on 5 August provided a flurry of comments with something for the doves and the hawks. The QE vote split was a tad more dovish with a 7-1 split with BoE’s Saunders to only dissenter, while the upgrades to growth and inflation were positive but with similar comments of ‘transitory’ price pressures muting any real market impact. The reasons for the bank to remain patient right now in terms of policy normalization is the current uncertainty surrounding the virus and of course the bank waiting for the end of the furlough scheme to assess the impact on the labour market. That means, that the bank would arguably be in wait-and-see mode until at least October or November. The other change that was important to take note of was the reduction in the bank’s QT threshold from 1.5% to 0.5%, with the bank looking at a bank rate of 0.5% to stop reinvesting maturing assets and a rate of 1.0% to start selling assets and reducing the balance sheet. Market participants are mixed about what this means for the bank as on the one end it’s positive since the bank has enough confidence to lower the balance sheet even while rates are low, but on the other end it also means that rates can stay lower for much longer which is more negative. Arguably the most important comments to take away was their continued optimism about the economy despite the uncertainty as well as their comments that modest tightening will be required. 3. The country’s economic developments Hopes of a fast economic recovery has seen the BOE and IMF upgrade GDP projections for the UK which has widened the growth differentials between other major economies by quite a bit. As the economy continues to rebound this should continue to be supportive for GBP as long as the data reflects that. Something to be mindful of is that a lot of these positives are arguably reflected in the price. Thus, if we start to see some disappointing data, that could mean that decent upside would be more difficult for Sterling. 4. Political Developments Remember Brexit? Yeah, me neither, but this week the rhetoric between the two sides continued to go in the wrong direction with the UK side explaining to the EU that they are looking at all the options on the table (include article 16) if they can’t reach an agreement with the EU regarding the Northern Ireland Protocol. For now, Sterling has looked through all the rigmarole and should continue to do so as long as the cans are kicked down the road. 4. CFTC Analysis GBP positioning moved back into neutral positioning with a +5598 build according to the most recent CFTC data. Current levels for Sterling still look attractive for med-term buyers, especially with the positioning seeing quite a flush in the past few weeks. With the only data point of note for Sterling in the week ahead being GDP data, we are mostly likely going to see majority of influence coming from movement in the USD and overall risk sentiment. JPY FUNDAMENTAL BIAS: BEARISH 1. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with good news about successful vaccinations, and ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. Of course, there remains many uncertainties and many countries are continuing to fight virus waves, but as a whole the outlook has kept on improving over the past couple of months, which would expect safe-haven demand to diminish and result in a bearish outlook for the JPY. 2. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares an inverse correlation to strong moves in yield differentials, more specifically in strong moves in US10Y. However, like most correlations, the strength of the inverse correlation between the JPY and US10Y is not perfect and will ebb and flow dependent on the type of market environment from a risk and cycle point of view. In the past week we saw a perfect environment for downside in the JPY versus the USD when better-than-expected ISM Services data and less dovish comments from Fed’s Clarida gave US10Y a lift alongside the US Dollar, which was enough for the USDJPY to break back above 109.00 and 109.50. Then on Friday the good US jobs report saw yet another environment for US10Y and the Dollar to push higher, creating yet another perfect environment for USDJPY to push higher, and the pair managed to reclaim the 110.00 and break above key technical trend support. Given the positive backdrop from last week, the pair should continue to enjoy upside, with the biggest risk being any major risk off moves which might see downside in yields and upside in the JPY from safe haven flows. 4. CFTC Analysis The JPY remains the biggest net short among the majors and didn’t manage to take any real advantage of the drop lower in US10Y. Given the wash out in treasury positions and the move towards 1.12% in US10Y over the past few weeks the JPY has not really taken the bait to appreciate as one would have thought. Thus, even though the currency remains oversold from a positioning point of view, it does show that there is some possible asymmetry in long USDJPY right now as a move lower in yields have not negatively affected the pair as one would have expected. After the most recent Fed rhetoric and the solid US data we’ve have finally seen some promising moves higher in US10Y in line with the med- term outlook, and with a very light data calendar in the week ahead a further move higher in the USD and US10Y could provide a good backdrop for a further grind higher in the USDJPY, with big risk off flows the biggest risk to that view as it should be supportive of the safe haven JPY.
by thunderpips
1
GBP JPY BUY (POUND STERLING - JAPANESE YEN)GBP FUNDAMENTAL BIAS: BULLISH 1. Virus Situation The UK’s vaccination success has been a key driver of positive sentiment for GBP from the start of 2021 and has meant the county have been able to open up their economy much faster and sooner. 2. The Monetary Policy outlook for the BOE Markets were expecting a hawkish tilt from the BOE at their June meeting with Gilt yields, SONIA futures and Sterling pushing higher into the meeting. The bank took a more balanced view by sticking to a transitory inflation outlook and also slightly tempering the more aggressive rate path expectations going into the meeting. As a result, GBP, Yields and SONIA futures unwound their pre-meeting upside. More recently the hawkish comments from dovish BoE member Saunders raised some expectations that a tapering of asset purchases might be on the card in the near future, with some participants looking at next week’s meeting as a possible hint from the bank that such a move might be on the cards. However, given how close the bank is to completing the current program, and given the fact that the bank would arguably want to wait and assess the impact on the labour market after the furlough scheme falls away, these expectations might be a bit too hawkish. Either way, the incoming BoE meeting next week will be an important one for Sterling and if we do see a more positive MPC that could just be what GBPUSD needs to push back above the 1.40 level. 3. The country’s economic developments Hopes of a faster economic recovery has seen both the BOE and IMF upgrade growth projections for the UK economy which has widened the growth differentials between other majors by quite a bit and should continue to be supportive for GBP as long as the data continues to show better-than-expected prints. Something to be mindful of is that a lot of these positives are arguably reflected in the price. Thus, if we start to see some disappointing data, as we have more recently, that could start to weigh on some of the aggressive normalization expectations. 4. Political Developments Remember Brexit? Yeah, me neither, but this week the rhetoric between the two sides continued to go in the wrong direction with the UK side explaining to the EU that they are looking at all the options on the table (include article 16) if they can’t reach an agreement with the EU regarding the Northern Ireland Protocol. For now Sterling has looked through all the rigmarole and should continue to do so as long as the cans are kicked down the road. JPY FUNDAMENTAL BIAS: BEARISH 1. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with good news about successful vaccinations, and ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. Of course, there remains many uncertainties and many countries are continuing to fight virus waves, but as a whole the outlook has kept on improving over the past couple of months, which would expect safe-haven demand to diminish and result in a bearish outlook for the JPY. 2. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares an inverse correlation to strong moves in yield differentials, more specifically in strong moves in US10Y . However, like most correlations, the strength of the inverse correlation between the JPY and US10Y is not perfect and will ebb and flow dependent on the type of market environment from a risk and cycle point of view. Even though the correlation was exceptionally strong from the start of the year, we have started to see some breakdown in the correlation over the past few weeks. The pair has broadly started to follow yields more recently, which has given us reason to take a pause in the pair as the bond market has not really been trading the way that we (and it seems vast majority of market participants) have expected. Given the current growth, inflation and tapering expectations the market expected yields to trade higher, but that hasn’t been the case of course. As long as yields remain stuck at key support the odds of building a base and moving higher again means the upside bias remains intact for USDJPY , but if yields should take out recent support, we would expect USDJPY to follow it lower.
by thunderpips
7
$GBPUSD - Ending diagonal and Head and ShouldersHi guys! 👋🏻 🔔 GBPUSD is about to complete the Ending diagonal pattern to end this correction move. 🔔 There is a Head and Shoulders pattern which is clearly traced on this 4H chart, so keep an eye on that too. 🔔 There are no clear signs of a strong bullish reversal for Pound, although as seen on a larger time frame, it's most likely that GBPUSD will continue the correction further. ✊🏻 Good luck with your trades! ✊🏻 If you like the idea hit the 👍🏻 button, follow me for more ideas.
Short
by azizelliott
2
GBP/USD - Crucial area to determine if we are heading lower🎡Technical Overview: - GBP/USD Check out our previous posted analysis Analysis is only 1 piece of the puzzle 🧩 Our analysis is a sentiment for the upcoming week, month. Use this as a weather forecast, you are the person that has to put on a jacket when it’s raining. Trade this sentiment based off your own entry strategy at the right time. Flow with the Devil 😈 Trade with the manipulation👾 STAY UPDATED BELOW!
by FlyDownX
2
GBP CHF BUY (POUND STERLING - SWISS FRANC)GBP - FUNDAMENTAL BIAS: BULLISH 1. Virus Situation The UK’s vaccination success has been a key driver of positive sentiment for GBP from the start of 2021 and has meant the county is on the verge of completely removing covid restrictions from the 19th of July. As long as the reopening moves forward as planned it should provide support for the GBP in the med-term. 2. The Monetary Policy outlook for the BOE Markets were expecting a hawkish tilt from the BOE at their June meeting with Gilt yields, SONIA futures and Sterling pushing higher into the meeting. The bank took a more balanced view by sticking to a transitory inflation outlook and also slightly tempering the more aggressive rate path expectations going into the meeting. As a result, GBP, Yields and SONIA futures unwound their pre-meeting upside, The short-lived downside has played out and that means focus for Sterling should be back on the med-term outlook, where the BoE is still expected as the next in line to tilt more hawkish, and participants will look towards the August meeting which includes the next MPR . This view was further reinforced this past week when two MPC members (Ramsden & Saunders) gave some pretty upbeat and hawkish comments suggesting that the possibility of tapering QE will be one of the points of debate during the upcoming meeting and that conditions for tighter policy is materializing faster than previously anticipated. This week we have the most dovish member of the BoE (Haskel) set to talk and all eyes will be on whether he provides a similar hint which would be a positive for Sterling. 3. The country’s economic developments Hopes of a faster economic recovery has seen both the BOE and IMF upgrade growth projections for the UK economy which has widened the growth differentials between other majors by quite a bit and should continue to be supportive for GBP as long as the data continues to show better-than-expected prints. Something to be mindful of is that a lot of these positives are arguably reflected in the price. Thus, if we start to see some disappointing data, as we have more recently, that could start to weigh on some of the aggressive normalization expectations. 4. Political Developments Remember Brexit? Yeah, me neither, but it came back into focus in the form of the recent punchy rhetoric between the UK and EU regarding the Northern Ireland Protocol which sparked some concerns about possible sanctions on the UK. Even though issues like chilled meats have made progress, the protocol and Brexit itself is about much more than sausages. The latest issue has been that of the divorce bill, which the UK says is between 35 and 39 billion while EU counterparts says it’s over 40 billion Pounds. For now these challenges won’t change the med-term outlook for Sterling unless it leads to actual trader sanctions or tariffs, which right now seems unlikely. CHF - FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook As a safe-haven currency, the market's risk outlook is the primary driver for the CHF. Swiss economic data rarely proves market moving; and although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall bearish tone and a preference for being behind the ECB in terms of policy decisions. The market's overall risk tone is improving with coronavirus vaccines being rolled out as well as the unprecedented amount of monetary policy accommodation and fiscal support from governments. Of course, risks remain as many countries are now battling third waves of the virus. As such, there is still a degree of uncertainty and risks to the overall risk outlook which could prove supportive for the CHF should negative factors for the global economy develop; however, on balance the overall risk outlook is continuing to improve and barring any major meltdowns in risk assets the bias for the CHF remains bearish. Despite the negative drivers, the CHF has remained surprisingly strong over the past couple of weeks. This divergence from the fundamental outlook doesn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests, thus be careful when trading the CHF and always keep the possibility of SNB intervention in mind.
by thunderpips
3
GBP JPY BUY (POUND STERLING - JAPANESE YEN)GBP - FUNDAMENTAL BIAS: BULLISH 1. Virus Situation The UK’s vaccination success has been a key driver of positive sentiment for GBP from the start of 2021 and has meant the county is on the verge of completely removing covid restrictions from the 19th of July. As long as the reopening moves forward as planned it should provide support for the GBP in the med-term. 2. The Monetary Policy outlook for the BOE Markets were expecting a hawkish tilt from the BOE at their June meeting with Gilt yields, SONIA futures and Sterling pushing higher into the meeting. The bank took a more balanced view by sticking to a transitory inflation outlook and also slightly tempering the more aggressive rate path expectations going into the meeting. As a result, GBP, Yields and SONIA futures unwound their pre-meeting upside, The short-lived downside has played out and that means focus for Sterling should be back on the med-term outlook, where the BoE is still expected as the next in line to tilt more hawkish, and participants will look towards the August meeting which includes the next MPR. This view was further reinforced this past week when two MPC members (Ramsden & Saunders) gave some pretty upbeat and hawkish comments suggesting that the possibility of tapering QE will be one of the points of debate during the upcoming meeting and that conditions for tighter policy is materializing faster than previously anticipated. This week we have the most dovish member of the BoE (Haskel) set to talk and all eyes will be on whether he provides a similar hint which would be a positive for Sterling. 3. The country’s economic developments Hopes of a faster economic recovery has seen both the BOE and IMF upgrade growth projections for the UK economy which has widened the growth differentials between other majors by quite a bit and should continue to be supportive for GBP as long as the data continues to show better-than-expected prints. Something to be mindful of is that a lot of these positives are arguably reflected in the price. Thus, if we start to see some disappointing data, as we have more recently, that could start to weigh on some of the aggressive normalization expectations. 4. Political Developments Remember Brexit? Yeah, me neither, but it came back into focus in the form of the recent punchy rhetoric between the UK and EU regarding the Northern Ireland Protocol which sparked some concerns about possible sanctions on the UK. Even though issues like chilled meats have made progress, the protocol and Brexit itself is about much more than sausages. The latest issue has been that of the divorce bill, which the UK says is between 35 and 39 billion while EU counterparts says it’s over 40 billion Pounds. For now these challenges won’t change the med-term outlook for Sterling unless it leads to actual trader sanctions or tariffs, which right now seems unlikely. JPY - FUNDAMENTAL BIAS: BEARISH 1. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with good news about successful vaccinations, and ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. Of course, there remains many uncertainties and many countries are continuing to fight virus waves, but as a whole the outlook has kept on improving over the past couple of months, which would expect safe-haven demand to diminish and result in a bearish outlook for the JPY. 2. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares an inverse correlation to strong moves in yield differentials, more specifically in strong moves in US10Y. However, like most correlations, the strength of the inverse correlation between the JPY and US10Y is not perfect and will ebb and flow dependent on the type of market environment from a risk and cycle point of view. Even though the correlation was exceptionally strong from the start of the year, we have started to see some breakdown in the correlation over the past few weeks. However, after the FOMC’s recent communication has improved the outlook for the US Dollar we would expect the low yielders like the JPY to remain pressured against the greenback which could see a weaker correlation develop with US10Y and see a continued bias titled higher for the USDJPY.
by thunderpips
2
GBPUSD - To Break LowerGBPUSD H1: Lots of confluence on GBPUSD here points to a break lower. Here we have a rejection of the 4 hour descending TL (on the 4 hour chart this also lines up with a rejection of the 100 EMA) The bullish push on the last hour candle I believe is one last run up before price continues its decline. 1.38 is holding as an area of support but if this breaks I believe we will see sub-1.38 prices today. With 1.39 holding as such strong psychological resistance i am definitely in favour of further bearish movement. The short position tool added to my chart highlights an excellent R:R of 1:4 with the target being at the 1.37500 mid-psychological level. let's see how this plays out! Hopefully some USD strength on New York open can provide further momentum to reaching target.
Short
by MMQ_FX
GBP/USD forecast Hello traders According to my wave count GBP/USD is on a corrective wave right now, i expect prices to break below the previous low at 1.3731 and if that happens price can go as low as 1.3400 since we will have bearish head & shoulder pattern breakout level, please be advice that is a 4 hour chart and if my analysis is right it make take several weeks to reach my targets I will enter short on this trade once a breakout occur below lower trendline of triangle on wave 4 happy trading
Short
by AlexPalmaFXTrader