Following longest fall since 2008 no surprise to see British pound and the 6B move higher in this morning's trading, on the back of profit taking and closure of US and Canadian markets for the Labor Day holiday.
From a VPA (volume price analysis) perspective the recent move lower has also been associated with falling volume suggesting the downwards pressure is, for now, running out of steam, with the platform of support at 1.5160 providing the reason for the pullback. Longer term, however, the outlook remains bearish for Cable, and should the 1.5160 price point fall to hold we may see a move towards 1.50 and even a possible re-test of the 1.46 region in due course.
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CSI Highlights GBP Sell Off
The Currency Strength Indicator (CSI) highlights GBP sell off clearly. It ranks currencies by relative performance. GBP drops sharply in rankings. This signals heavy selling pressure. Traders see weakness early.
Ahead of the release of the Monetary Policy Minutes from the RBA, and tomorrow's CPI number for the UK, it's been interesting to see how the Aussie and British pound have been behaving in today's trading session. And of the two currencies it has been the British pound which has seen some heavy selling against both the USD and the Aussie.
The hourly chart of the CSI (currency strength indicator) highlighted the extent to which the British pound was overbought, and Cable's failure to take out the resistance at 1.5688 signaled the start of a reversal in fortune for the pair and a move lower of over 100 pips. And it has only been a combination of the VPOC at 1.5585 and support at 1.5578 that has prevented...
USD Looks Set to Move Higher
The USD looks set to move higher in recent sessions. Buying pressure builds steadily. This reflects renewed dollar strength. Traders watch for continuation across majors.
In the current media speculation surrounding the impact of the PBOC decision to revalue/devalue the yuan, particularly on how this may (or may not) affect the FED's decision about raising interest rates, it is easy to forget two things. First, the fundamental news releases which too will add their own layer of volatility, and second Greece, which today is back centre stage as the Greek parliament meets today in emergency session to ratify the latest bail out deal.
Key Releases
Today's key releases are primarily in the US with retail sales, core retail sales and the unemployment claims due. And of these it is the retail sales numbers which the market will be focused on primarily because they may give some guidance as to the FED's thinking about interest rates.
Meantime in this morning's...
The overnight fall in the Nikkei 225 of 1.76% has resulted in an impressive two bar reversal (aka a shooting star) on the daily chart for the USD/JPY - so no surprise to see the pair move lower in this morning's trading session.
What is perhaps more significant is this move in the JPY is not consistent across the JPY pairs we follow on our matrix, and in particular the EUR/JPY and GBP/JPY. The latter is a pair I am looking to short on a longer term basis, but patience is required not least because I want to see the JPY begin to move away from the bottom (oversold) on the currency strength indicator. This also highlights a key aspect of forex trading, namely individual currencies can stay overbought or oversold for much longer than we expect. Much, of course, will depend on risk sentiment, and in particular whether the current downwards trend in equities continues, and if so then we...
GBP Now Awaits BOE This Morning
GBP now awaits the Bank of England (BOE) decision this morning. Rate changes or forward guidance can drive volatility. Traders watch for clues on policy direction. This often sparks sharp moves in pound pairs.
The combination of poor retail sales and a worse than expected Trade Balance number has resulted in a unanimous sell of Aussie overnight, with big moves across all the AUD pairs.Now focus shifts to the UK, US & Canada. First up is GBP with an interest rate decision from the BOE and statement. Market not expecting any change, but statement will be interesting given recent run of poor PMI. On the GBP matrix of six pairs we monitor cable's recent reversal off the VPOC indicator for MT4 at 1.5145 has now stalled & is waiting for today's news.Of the others GBP/JPY has been in consolidation and testing the deep resistance at the 190.71 area.
And of the three GBP commodity pairs, all look...
Aussie Dollar Now in Sharp Focus Ahead of Trade Balance
The Aussie dollar is now in sharp focus ahead of Trade Balance data. This release measures exports vs imports. Strong figures boost AUD. Weak ones pressure it. Traders watch closely for commodity currency clues.
If you come along to our forex webinars you will always hear David & I explain the importance of the fundamental news & how easy it is to be ambushed by 'events'. But I must admit so far it's been absolutely relentless & it's only Wednesday! Coming up we have Aussie retail sales & Trade Balance - both very important numbers, and so far it's been a buy of the Aussie except against the euro - a trade we've been following. Of the two releases - the Trade Balance number has been negative since July last year, and whilst February's number was encouraging, coming in at -0.44b against a forecast of -0.85b, the subsequent releases have been dire.
Tonight's...
EUR/NZD Reverses Recent Trend for the New Zealand Dollar
EUR/NZD reverses the recent trend for the New Zealand dollar. This cross pair shows shifting momentum. NZD weakness fades. Euro gains relational strength. Traders spot potential upside in EUR/NZD.
The EUR/NZD has delivered some excellent trading opportunities across all the timeframes this morning to the short side, following the recent heavily bearish sentiment towards the New Zealand dollar which has seen it weaken against all the major currencies. Indeed longer term the NZD is now looking increasingly oversold, so we may see this trend reflected on the slower timeframe charts in due course.
This Morning's Move
This morning's move was signalled initially with a move below the volume point of control (VPOC) on the 30-minute chart ( the yellow line), a move that was duly supported with rising volume and confirming the bearish sentiment. In addition, the transition in the trend monitor indicator from blue to red also confirmed this reversal, coupled with a pivot...
GBP Gets a Boost from Retail Sales
GBP gets a boost from strong retail sales data. Positive figures signal consumer spending strength. This supports economic growth expectations. Traders see it as bullish for the pound.
UK retail sales have given GBP a real boost higher & it's occupying six top spots on the currency matrix. Number was a great improvement & market has temporarily forgotten the negative CPI number.
What's interesting is at 8.00 am at the London open, there was a huge buy of cable off an important order board level at 1.5520 with retail sales then just adding the momentum.
Cable is also benefiting from USD pull back from its recent bullish move higher. The 4hr currency strength indicator is particularly revealing as the USD has been overbought for some time, but is now moving lower. The move higher in the London session has now tested the VPOC level on the daily chart, and we are waiting to see if this afternoon's...
In a relatively quiet day of trading in the forex markets with both the UK and Japan closed for public holidays, it's been the Canadian dollar which has moved significantly during the session, and picking up the longer term bearish tone once again. In early trading, the pair moved in a tight range, before finally breaking through the platform of support in the 1.2145 area and continuing lower to currently trade at 1.2095 at the time of writing. The price action has now continued lower with the volume point of control indicator (VPOC indicator MT4) remaining firmly in place above in the 1.2110 area on the 30 minute chart, and signalling further downside momentum in due course.
The trend monitor has remained firmly red throughout the trading session, and with the currency strength indicator to the left confirming further strength for the CAD and weakness for the USD, the volume point of control (VPOC) is likely to move to the next...
An Interesting Week For GBP
It was an interesting week for the British pound and, in particular, against the US dollar, with the pair selling off sharply on Friday and closing with a wide spread down candle on the daily chart. The move lower was in stark contrast to the recent trend for Cable, which had been firmly bullish, rising in tandem with the EUR/USD as US dollar weakness prevailed on the dollar index. The move on Friday came as no surprise to those traders using a currency strength indicator, with the British pound moving into a deeply overbought region on the indicator, while the US dollar was equally oversold in the slower timeframes.
With Thursday's election now on the horizon, and with a slew of opinion polls due for release in the next few days, these are continually signalling a close result with no party likely to have an overall majority in Parliament. As a result, we can expect to see...
