Next 24h, the main focus market pay attention is BOE Meeting: a Bank Inflation Report, Rate Decision, Monetary Policy Statement, and a Speak of Governor Mark Carney.
This risk event will decide the move of Sterling in last three months of this year. Very important that we can't ignore.
Let me begin with Inflation Report first.The fact is UK Inflation is very low: Below 0% currently. Eurozone is facing low inflation recent years and ECB tried many ways to liftoff this situation, UK Inflation is not a exception. I think BOE couldn't ignore this fact if they want to change monetary policy. Due to low inflatiton, I think Inflation Report should mention this and avoid to talk about a positive improve in inflation; moreover, I tthink the report also lowers the UK GDP forecast. Those are the key points I think the Report should have. +1 point for Dovish.
Next, I talk about the rate vote. Last Meeting, we saw Mcafferty joined the hike vote side, and Kristen Forbes could follow Mcafferty. It means there is a probability of 2 hike votes. 2 hike votes don't ensure for a possive hike in this meeting, but it's hawkish enough to soar Sterling. +1 point for Hawkish.
And what about UK data recent weeks ?. Mostly data are quite good. except CPI and GDP data, PPI, CPI, Retail Sales, and Consumer Confidence are better than expect. This proved UK economy is still on track, and a 'lifoff' in 2016 is a possibility on the table of BOE. +1 point for Hawkish side.
The last thing I want to talk is Mark Carney speech. I surely know that Mark Carney would not be too mush hawkish. ECB is planning for more measure to support Eurozone, and UK is the main trading partner of EZ, I think Carney will choose the safe solution is to leave an open door for a meaningfull change. He will acknowledge the improvement of UK macroeconomy, but keep cautious attitude until FED trigger the hike first. As Bernarik of FXstreet: " He wants FED do the dirty work first, then he follows". I also think that. However, I consider +1 point for Hawkish side.
Dovish: 1 -3 Hawkish.
I think there will a significant change tomorrow, and the side I choose is LONG.
HOWEVER, THE BIGGEST PROBLEM I WANT TO SAY IS:
- FED IS THE ONE DOES FIRST, AND BOE FOLLOWS. WE MUST NOT IGNORE FED. PAYROLLS ON FRIDAY MOST LIKELY IS POSITIVE DUE TO POSITIVE ADP TODAY. HENCE, I MAINTAIN A LONG TERM BEARISH BIAS FOR STERLING VS DOLLAR. I KEEP 1.5500 LEVEL AS BENCHMARK TO HIT A SELL POSITION. STERLING RALLY VS DOLLAR COULD BE RESTRICTED ,BUT IT WILL ACTIVE VS EURO, KIWI, AUSSIE, AND YEN. BUY EURGBP IS A GOOD OPTION.
-Technical Analysis
Look at on the chart, strong resistance is at 1.5500: This is also SMA100 : A level which Sterling respects recent weeks.
GBPUSD also keeps below Kumo cloud.
RSI indicator shows a test of bearish trend line.
While I especially watch a big wedge pattern I draw on the chart: Any break is a potential signal for a trend.
TA plays the minor point tomorrow because market pays attention on Fundamentals.
Finally, I will SELL at 1.5500 as my final view.
This risk event will decide the move of Sterling in last three months of this year. Very important that we can't ignore.
Let me begin with Inflation Report first.The fact is UK Inflation is very low: Below 0% currently. Eurozone is facing low inflation recent years and ECB tried many ways to liftoff this situation, UK Inflation is not a exception. I think BOE couldn't ignore this fact if they want to change monetary policy. Due to low inflatiton, I think Inflation Report should mention this and avoid to talk about a positive improve in inflation; moreover, I tthink the report also lowers the UK GDP forecast. Those are the key points I think the Report should have. +1 point for Dovish.
Next, I talk about the rate vote. Last Meeting, we saw Mcafferty joined the hike vote side, and Kristen Forbes could follow Mcafferty. It means there is a probability of 2 hike votes. 2 hike votes don't ensure for a possive hike in this meeting, but it's hawkish enough to soar Sterling. +1 point for Hawkish.
And what about UK data recent weeks ?. Mostly data are quite good. except CPI and GDP data, PPI, CPI, Retail Sales, and Consumer Confidence are better than expect. This proved UK economy is still on track, and a 'lifoff' in 2016 is a possibility on the table of BOE. +1 point for Hawkish side.
The last thing I want to talk is Mark Carney speech. I surely know that Mark Carney would not be too mush hawkish. ECB is planning for more measure to support Eurozone, and UK is the main trading partner of EZ, I think Carney will choose the safe solution is to leave an open door for a meaningfull change. He will acknowledge the improvement of UK macroeconomy, but keep cautious attitude until FED trigger the hike first. As Bernarik of FXstreet: " He wants FED do the dirty work first, then he follows". I also think that. However, I consider +1 point for Hawkish side.
Dovish: 1 -3 Hawkish.
I think there will a significant change tomorrow, and the side I choose is LONG.
HOWEVER, THE BIGGEST PROBLEM I WANT TO SAY IS:
- FED IS THE ONE DOES FIRST, AND BOE FOLLOWS. WE MUST NOT IGNORE FED. PAYROLLS ON FRIDAY MOST LIKELY IS POSITIVE DUE TO POSITIVE ADP TODAY. HENCE, I MAINTAIN A LONG TERM BEARISH BIAS FOR STERLING VS DOLLAR. I KEEP 1.5500 LEVEL AS BENCHMARK TO HIT A SELL POSITION. STERLING RALLY VS DOLLAR COULD BE RESTRICTED ,BUT IT WILL ACTIVE VS EURO, KIWI, AUSSIE, AND YEN. BUY EURGBP IS A GOOD OPTION.
-Technical Analysis
Look at on the chart, strong resistance is at 1.5500: This is also SMA100 : A level which Sterling respects recent weeks.
GBPUSD also keeps below Kumo cloud.
RSI indicator shows a test of bearish trend line.
While I especially watch a big wedge pattern I draw on the chart: Any break is a potential signal for a trend.
TA plays the minor point tomorrow because market pays attention on Fundamentals.
Finally, I will SELL at 1.5500 as my final view.