- GBP has been suffered from the depreciation of Sterling since Brexit and although 2016 we saw economy of UK had been well supported, the biggest worry was that the inflation will be higher and reflected in the consumption which is also a large part of UK GDP. The retail sales will be an important data to see whether the inflation of GBP depreciation has now slowly kicked in. The last retail sales was a big disappointment. For Retail Sales y/y, we went from 7.4% to 5.9% to 4.3% in the last 3 quarters. The expectation is 3.4% this time. The average has been 2.65%. The month to month was more volatile which we went from 1.9% to 0.2% and -1.9% with average of 0.23%. For core retail sales y/y, we went from 7.5% to 6.4% to 4.9%. For core retail sales m/m we went from 2.1% to 0.2% to -2%. Sentimentally as we’re approaching March the triggering o article 50 will become a much bigger catalyst for UK with general sentiment to the downside due to the uncertainty over the future without Eurozone. Moreover, from previous experiences the positive datas of UK since 2017 had always been short lived in the price action and it just showed that we have more traders whom are interested to sell GBP than buy it. Therefore, i’m trading this risk even to the downside with negative deviation. The pair i’m choosing is GBP/USD because USD is a great currency to buy with the fundamental and sentimental strength.
- The catalyst is the UK retail sales that was expected to be lower but better than previous. We will sell GBP if we have negative deviations.
- GBP/USD is currently at below PP and because of the risk off sentiment now, GBP/JPY & GBP/CHF are also available for intraday risk event trade but we will exit the trade asap if we choose GBP/CHF AND GPB/JPY. GBP/CHF still has room to go where gbp/jpy is already too low.
- The risk is dollar weakness due to sentimental change from the politics and policies. Because of that, we can consider exit the trade prior market close but of course, if we hold it longer, it might go down even further and as our price in trade for the upcoming Tax Reform of dollar and more uncertainty of Brexit.
- The future projection is a strong dollar and weak GBP but in near term people are still worried about dollar weakness over the policy uncertainty.
- Yes we can enter this trade but only if we have deviations.
4 minutes prior to risk event now all GBP pairs had dropped significantly and no more room to go, so no trade!
if the release is negative deviation and we have retradcement afterward to around 1.25 handle which is also around PP in GBP/USD then we can enter it.
But only if we have retracement afterward.
The 4 datas retail sales m/m y/y headline and core are all negative and negative deviations in all 4 datas.
This is so negative for UK and on top of the Brexit, we’re now going to place a pending order at 1.25 handle with SL at 1.2725 and profit at 1.2100 as a Daily entry with risk event as a catalyst.
SL @ 1.2725
P @ 1.2000
****updated Feb 24th 5pm****
we got filled on Feb 22nd and it went against us but today went below 1.25 again.
We’re quiet confident in this long-term swing trade and think 1.25 should be resilient enough for this trade to work out while SL 1.2725 is still high enough and downside probability is still high also.
****updated March 2nd 7pm****
Because of the USD strength and the GBP weakness both fundamentally and sentimentally, this trade is not working well.
We’re looking to set SL to BE at 1.2275 which we already hit today.
we now set SL to BE.
We expect to have some pullback in next few days but still think 1.25 should hold up well.
We are still in because we think the Fed rate hike possibility with Brexit Bill both at the same time will see another fro in GBP/USD to historical low, especially when the Article is triggered.