- GBP has been a neutral currency with fundamental bearish outlook due to the future Brexit uncertainty and the current high inflation. The recent resales data have shown the slowdown effect from high inflation of the GBP devaluation. Today the manufacturing data although not the major sector for UK but still tradable if we have a deviation. I’m looking to short GBP if we have any sort of deviation upset against USD, but because i have several USD trade CAD trade and AUD trade already, the only strong currency left is NZD because of the fundamental bias. If the data is a beat then we can buy GBP to hedge our GBP/AUD trade although one is more in a long-term perceptive. WE will buy GBP against EUR as we already have JPY in our plate, and we also have CHF already.
- The catalyst will be the UK Manfucatirng data which is expected to be lower than last time at 0.3%. If we have a beat, we will short EUR/GBP and if we have a beat, we will short GBP/NZD
- We’re at both PP levels for EUR/GBP and GBP/NZD so both are available to enter.
- The risk is that if we’re going to sell GBP, we will have more than 1% on the plate so most likely set SL to BE asap or wrap it up before NY sessions open. Aim to take profit at lower pivot levels then. The correct way is to NOT take a SHORT GBP trade because we already have an exiting GBP/AUD short. We should never risk more than 1% in any one of the Single Currency as this is a rule of thumb to minimize the Risk, remember no matter how convicted you are with a trade, there are always factors that are unknown to use and never overexpose ourselves as this is the number ONE rule..
- The future projection is upset is a continuation of economic deterioration for UK however if the data is a positive deviation, it should give some nice hope in the resilient economy of UK
- Yes but only trade with deviation
- The result was a large surprise in tier on manufacturing data but also the accompanied datas such as industrial output mm yy and manufacturing output yy and Goods Trade Balance were all positive data.
The immediate reaction was to the downside but not much movement as we expected, as mentioned, most general bias for GBP is still to the downside
- We think GBP might drift to the range bound and still lose ground to stronger currencies such as AUD, but for EUR/GBP it might very well ended lower to firs test handle 0.85 and if we can close below, than next test will be 0.8450 all the way to strong support of 0.84.
- i’m still in this trade because the fundamental strength from this data is very strong especially when versus EUR, which also has the negative sentiment of French election and Dutch election. I think for short-term it should still look to the downside especially for EUR/GBP.
- Yes but i think both EUR & GBP should be largely sold off today with GBP might be performing better due to the risk on sentiment.
SHORT @ 0.8515
SL @ 0.8615
P @ 0.8415
****updated Feb 10th 7:55am EST****
we’re still stalling in this trade with a bit drawdown but no major movement or fundamental catalyst to come.
A closer look at the datas, the particular positive aspect is the trade balance because the export has increased for non-EU members, this is a very good sign for UK to slowly expand outside the Eurozone as the Brexit will be effective very soon.
Although the m/m datas from Industrial output and manufacturing output were all lower than previous and better than expected, but the y/y datas were all very positive and large surplus than previous.
The m/m data could simply be seasonal as y/y datas play a more important role for the fundamental picture.
Because of that, we think fundamentally GBP is solid especially in comparison with weaker currencies.
The biggest risk will be the sentiment as the Brexit bill is still under review in the House of Lords and that will be the big blow for this trade.
Other than that, we think EUR also has the uncertainty from the election so both risk sentiment might be hedged out.
Than it’s a matter of comparison in terms of fundamental datas, which both countries also had promising starts in 2017.
To narrow it down further, then perhaps GBP has a better edge as higher yield and better performance under the risk on sentiment.
Nevertheless, this trade might very well go into the sideway movement as no particular strength or weakness into either currencies, if that’s the case we will try to exit at BE prior Friday close.
****updated after the Press conference of Trump and Abe****
as expected, there weren’t too much updates and the general tone was quiet friendly.
According to the geopolitical location of Japan and U.S, the past history since world war 2, and the current necessity for U.S alliance in the Pacific ocean, i really doubt there will any disagreements that are large enough to tera up the relationship.
On the contrary, I think the weekend meeting will most likely be a gateway and show-off for U.S.
I’m still holding this trade because the strength of USD might pressure both EUR & GBP, while the weakness of USD will benefit both EUR & GBP.
As mentioned, it is very likely for the pair to into sideway and that was the case for today for now.
If compare both currencies in fundamental strength, GBP still enjoys a higher yield, higher possibility for hike, higher GDP growth and lower uncertainty as the outcome for “hard Brexit” has been anticipated already many man times.
Where in EUR, the French election updates can shift any moment over the weekend, any upset news can sink EUR again to cause panic.
Meanwhile, Greece debt negotiation is still on going at the moment and might be another upset.
Finally, no sign of tapering for QE for ECB.
So i think in comparison, EUR still has more weakness both fundamentally and sentimentally over GBP for now.
****updated on Feb 13th 2am****
There are no major news in regards to GBP or EUR over the weekend, from our weekly outlook we still put bearish outlook for EUR but GBP is also in a neutral perspective without any positive or negative outlook.
The market opened low for Sunday and we’re trailing to the downside now.
The issue with this trade is that although there are slightly more bullish element behind GBP from last week’s positive GBP datas, there aren’t too much to drive this pair down as both currencies bear some negative outlook sentimentally and fundamentally.
We’re helped by the current risk on sentiment which pressures EUR more than GBP, but it can shift to any side with any news to come.
Technically we’re hitting the previous intraday support at around 0.85 handle now, the next support will be 0.8475 which is intraday support and daily pivot S2 for today.
We’re holing this for now but will like to see how European market opens later on, if we continue the risk on sentiment then the pair can touch 0.8475 which we will get out.
If the market turns to the downside with risk off sentiment, then we will do an early exit.
I’m going to exit half for now and set SL to BE to prevent any nasty upside movement as this is Monday and we never know what market is heading later on in London session.
I’m going to exit another half at intraday support 0.8475 and then hold the rest until daily 200EMA 0.8420.
Of course, we’re very likely to get stopped out at BE which is only 15 pips away.