Major currencies little changed as BOE takes centre stage

British pound

What Happened Yesterday

There wasn’t a huge amount of fresh news out yesterday so the major currencies basically followed their recent short term paths. We did see the USD index dip down to 92.55 to make fresh 2-1/2 year lows on the back of St. Louis Federal Reserve President Bullard’s comments that he was opposed to further US interest rate hikes.

Bullard’s comments reinforced skepticism surrounding another Fed rate increase this year, analysts said. Expectations for another hike in December last stood at about 46%, according to CME Group’s FedWatch tool.

But Bullard’s views are not new as he has been opposed to rate hikes the whole time. But what it does confirm is the view that many traders have and that is that further FED hikes are going to be limited.

The USD did firm a touch on the back of a potential trade war with China which would greatly impact the commodity currencies AUD, NZD and CAD which we’ve seen weaken the past few sessions. This could gain further momentum as Trump looks to rebuild some international respect after domestic issues are hammering in the popularity polls.

If anything the market has steadied itself for today’s BOE MPC Meeting and Friday’s US Non-Farm payrolls.

Today’s Fundamental Drivers

Attention now swings to Sterling with today’s important BOE MPC meeting. Now don’t get sucked into the hype of the media who appear to be frothing at the mouth at the prospect of something new out of the BOE.

But remember it wasn’t that long ago that BOE Gov Carney said ‘now is not the time to raise rates’. So do not expect any changes in rates.

What we might see is a change in the MPC Vote count and that could see a move into a more hawkish attitude from the BOE. Of course Carney’s speech half an hour after the release of all the ‘data’ will also be very important.

Technical Set Up – What’s Happening with the Majors

The majors are pretty much within their recent ranges except for a few subtle trendline adjustments on the AUD, NZD and CAD.

The really good thing is the majors are building to a good trading opportunity. They are trading steady and we have good trendlines….. we just need the last ingredient (and probably the most important) the direction!

EURUSD

Business as usual and it’s loving the fresh air up here. The Euro is looking extremely comfortable above 1.1800 and that potentially sets it up for a move above 1.2000 if the US NFP data friday is crap.

GBPUSD

Sterling has enjoyed an easy ride to the topside. The question is was it on the back of BOE expectations? If so we could see a wild and woolly ride if the BOE falls short of the hawkish tone the market is expecting.

USDJPY

The YEN is building for a big move….bring on Fridays NFP data!

AUDUSD

Trading with a slightly soft tone after the RBA remained neutral and as the potential China – USA trade war gathers steam.

NZDUSD

Trading with a slightly soft tone after weak jobs growth data yesterday and as the potential China – USA trade war gathers steam.

USDCAD

It’s getting tricky again as Oil starts to chop about and the USD itself doesn’t know if it’s going up or down. One thing is for sure the CAD long term is going up. So at this point it will fluctuate around the USD and Oil price.

Today’s Focus – Major Currencies in Play

You need to follow the economic data releases & best technical set ups to work out where the majority of action and interest will be.

GBPUSD

Technical Set Up: Support trendline 1.3170

Fundamental Driver: BOE MPC Meeting, Vote Count, BOE Gov Carney speech

Potential Strategy: The trend is your friend. Unless something big changes I’m a buyer of GBP. You just need to find a level or trade the data as it’s released!

Next Best Trade Update

My apologies the links have not been finalised as I expected. It’s anytime now and i’ll notify you as soon as it’s up. Believe me it’s doing my head in as much as it’s doing yours!

I am still looking to get short USDCAD and USDYEN on rallies at this stage. I also like the prospect of a higher EUR and GBP so watch today’s BOE meeting closely.

Summary

The market has been waiting for today to arrive all week. This is the start of a potentially big 48 hours as we run straight from the BOE meeting into the US Non-Farm payrolls data on Friday which will hopefully one way or another give us more defined direction on the USD.

I’ll be running a live trading webinar over the Non-Farm Payrolls tomorrow and everyone is welcome to join me. Usually this is only for Elite Members but since i’m testing out the new system and we’ve been ironing out a few bigs we thought it’d be good to give everyone a look.

If you haven’t been trading much like me, stay relaxed as the good trades are on the way!

Brad

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