FX Trading Event
Good Morning Platinum Traders,
I am back and that too with a Phenomenal FX Trading Event.
This Thursday is going to be absolutely crazy and we could actually see some phenomenal moves in the market.
The question that most traders or non-traders have on their mind is?
- Will the bank of England cut the interest rate?
- Quantitative easing take place for around 75-100 billion?
- Introduction of any new policies or loans?
What else is happening on Thursday?
We have the Inflation report that only comes out once a quarter and this is a very key event in FX Trading.
After this, there is the BOE Decision
Last but not least we have a press conference to discuss the meeting minutes about the decision by Mark Carney (AKA Governor of Bank of England)
So let’s take a recap in what happened in the last Bank of England decision.
The members of the BOE came to a decision that they would loosen the monetary policy but are awaiting more information. Brexit has really hit the pound hard as you can see we are currently sitting at levels not seen in 30 years and with this this bond yields crashed as well. This shows instability and uncertainty when it comes to the UK economy. The FTSE even fell quite drastically but has just made a recovery over this last one month but, can we sustain it? Only time will tell!
So now we know what is going on with this Phenomenal FX trading day, let’s find out how to trade it:
Before we even start to trade, remember the Platinum methodology states that every single trade needs to have the following:
Logical View + Fundamental View + Technical View + Perfect Stop Loss + Perfect Entry and Perfect Target
(This way you be 100% that you gave solid reason for taking the trade)
Fundamental Point of View:
In July the BOE made a decision to keep rates on hold, at Platinum our analysts do not believe that the Bank of England will disappoint us at all.
It is obvious from the order flow and the current rate of GBP/USD that this rate cut has been priced in and for the price to break below 1.3000
And the bears to take full control we would need a 50BP Cut.
Logical Point of View
The market has clearly priced in and ready for a rate cut what are the implications on GBP/USD:
- If they keep the interest rate the same, we could see a 150 Pips move to the upside
- If the interest rate gets cut to 50 BP, we could see test of 1.3000 and below
- Interest rate getting cut to 25 BP, we could see a whipsaw in the market and not much change
The extent to which the market is priced for a QE response is harder to calibrate but we doubt this would come as a total surprise given the terms upon which the Bank of England has spoken about the need to respond to the current period of heightened uncertainty. Nonetheless, a rate cut accompanied by a QE response would be initially negative for the currency as GBP rejoins the ranks of the funding currencies (JPY and EUR) but without having the luxury of a current account surplus. However, we are aware of the recent trend where central banks have delivered further QE but their currencies have subsequently rallied.
The key to whether GBP weakness can be sustained is the extent to which the Bank of England forecasts leave the door open for a further policy response in the months ahead.
TECHNICAL POINT OF VIEW:
PRE BANK OF ENGLAND VIEW ON GBP/USD
From the chart below it is very clear we are in a symmetrical triangle. To see this particular pattern and how it plays out look at the diagram A. We are currently in a period of indecision and the first trade that should come to our mind is a breakout pull back and continuation trade. We have also outlined the various major supply and demand areas on the chart which you should place alerts on. If you don’t understand any of the terminologies, please book a Free Consultation with one of our senior traders today.
How to trade the GBP/USD:
- Short the GBP/USD @1.3540 or nearest zone with a 20 Pips stop loss and look for an intraday trade. This is just a one to one trade which could make you a quick 20 Pips. The above scenario could play out if the decision is – NOT TO CUT THE INTEREST RATE BY 25 BP.
- Short the GBP/USD 1.3385 or nearest zone with a 35 Pips stop loss and a target of 1.3200.This is just a one to one trade which could make you a quick 185 Pips. The above scenario could play out if the decision is – TO CUT THE INTEREST RATE BY 50 BP.
- Long the GBP/USD 1.3240 or nearest zone with a 35 Pips stop loss and a target of 1.3380.This is just a one to one trade which could make you a quick 185 Pips. The above scenario could play out if the decision is – NOT TO CUT THE INTEREST RATE BY 25 BP.
- Long the GBP/USD 1.3070 or nearest zone with a 20 Pips stop loss and look for an intraday trade. This is just a one to one trade which could make you a quick 20 Pips. The above scenario could play out if the decision is – TO CUT THE INTEREST RATE BY 50 BP.
Place alerts on the major and minor support areas and match them with the zones and go for 20/20 trades
IF THEY CUT 50 BP AND ALSO QUANTITATIVE EASING THIS WOULD MEAN PANDEMONIUM. DO NOT TRY AND LONG GBP/USD AND DO NOT REVENGE TRADE.
If this does happen and you are short keep holding for a 500 Pips ride
Live from the FX Trading floor!
Platinum Trading Academy for FX Trading
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