GBP Strengthens On Verbal Intervention Feb 26, 2015
GBP Strength Likely To Continue On Rate Hike Threats
When all else fails there is nothing like the good old verbal intervention. This one in particular was not the typical one coming from the BOE Governor Carney but another BOE member stating that the markets are not taking a potential rate hike seriously. Everyone should remember the last time Carney did say something to the same degree and the GBP/USD rose around 200 pips only to be given back a day or so later as Carney took a step back saying that the market misunderstood him. I wont bore you with all the details about the fact that neither the BOE or Fed cant really raise rates to anything close to normal like they really should be if we are on the road to full recovery. The mere fact that most all western governments are eyeball deep in debt and continue to dig the hole deeper every day means that any substantial rise in interest paid on that debt will only raise the need for more debt to pay said interest leaves them in a never ending circle unless of course there is some miracle of a rise in GDP and personal wage growth to off set that with tax revenue. That is far from the case right now so the probability of any rate hike other than a token .1% just to be able to say they did it, is very low. However it always sounds good and as long as they get the reaction they like, they will keep on doing the same.
EUR/USD Pushes Up Higher In Range
I cant really say this potential push to the upside is enough to give me a solid bias but considering that Yellen was not as hawkish in her testimony it makes sense they would be at least testing the waters for a run to the high of the range. Therefore I will be cautiously bias for the next push up today but just as happy to short from yesterdays highs at 1.1386 with the best long level at 1.1340.
GBP/USD Stronger After Verbal Intervention
The GBP/USD has been stronger most all month and with the daily conviction above the 1.5500 level it has a good chance of testing higher at least to around 1.5580. I am a little concerned that the hourly conviction being the Asian fake out but will be looking for London to hold it. The best level for the long is down at the Asian lows of 1.5518 but if they do keep pushing up then I will consider the long at yesterdays highs. The good thing is this we are looking to see the third push today, the bad news is it might finish early since its already well into it from the lows at the start of the NY session yesterday.
EUR/JPY Holding Tighter Range
They werent in the mood for a push on the EUR/JPY yesterday tightening up the ADR and running into a tight triangle. Again I wont have a major bias but the early conviction and set up did get me long this morning. If it cant push off in the next hour or so I will be exiting with a small hit and wait for the London session and a retest. This move does suggest they will test up to 135.49 which is where I will be moving the stop to break even if they can get there. Otherwise I will be open for the short at 135.49 if I end up closing. If they do push it down the best level for the long is down at yesterdays lows of 134.55. The two levels in between are valid but do carry more risk so I will need some clear trapping to take an entry there.
Forex News Today
The calendar is busier today starting early with German GFK Consumer Climate expected to rise slightly. This will likely be close or even better with fairly decent data coming from Germany lately. However its less likely to create a sustained move barring a big miss. Later they also have their Unemployment data that could get things rolling on a positive miss. The UK has their GDP release today expected to be flat so I would expect a slight improvement will get them pushing GBP strength again.
Later the US has CPI, Durable Goods and Thursday Unemployment. Core CPI is expected to rise above the last big zero print but not by much so a disappointment should get some USD weakness while Durable goods has a better chance of being better than expected since we had better housing data yesterday so these may off set each other. Unemployment Claims is expected higher but I dont expect much unless it pops above 300K and the other data comes out as expected. The chance of it being better than expected is small considering oil sector layoffs still trickling in.
Late in the day there is more Fed speak but I doubt tha speech will break from what Yellen said over the last couple days.
Asian session traders have Japanese inflation data to watch tomorrow.
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