British Pound Thursday into NFP Friday

August 7, 2015

Bank of England Recap:
Cable pulled back against all of the major currencies overnight as the Bank of England disappointed the market with its Monetary Policy announcement.

GBP/USD 4 Hourly:
gu5
Click on chart to see a larger view.

We spoke yesterday about the top marked level as an area to get long GBP/USD if the BoE played ball, but the scenario obviously didn’t play out and the level was breached. The bottom level that coincides with channel support did hold on the first touch, but that chart sure looks heavy now.

“The vote is reported in an ‘X-X-X’ format – the first number is how many MPC members voted to increase interest rates, the second number is how many voted to decrease rates, and the third is how many voted to hold rates.”

Voting members of the Monetary Policy Committee (the MPC) voted 1-0-8 to keep rates on hold. Markets were expecting something more than the almost unanimous decision that we got. Analysts had anticipated that two or three policymakers would vote for a rate increase.

Furthermore, the BoE released its latest Inflation Report, saying the outlook for inflation was “muted”. Again leading to the conclusion that rates will stay on hold for a little while longer yet.

Yes, we’ve got a way to go yet.

NFP Friday:
We move onto Non Farm Payrolls tonight with this month’s labour market number in the spotlight after the Federal Reserve singled out jobs as their area of focus. It’s no secret that the Fed has focused their attention looking for “some further job market improvement” before liftoff can begin.

“USD Non-Farm Employment Change (222K expected and 223K previous).”

USDX Daily:
usdx4
Click on chart to see a larger view.

I thought it funny enough to include Donald Trump the walking headline’s assessment of the jobs market in one of today’s Forbes articles.

“Mr. Trump believes that the real unemployment rate is over 18%, not the reported 5.5%.”

“Trump’s distrust of the government’s job statistics isn’t new. In July, he even suggested that the U.S. unemployment rate could be as high as 40%.”

Ha!

Finally, although Asia has taken a back seat in the overall picture, we get Monetary Policy Statements from both the Reserve Bank of Australia and the Bank of Japan. Stay up to date with what’s happening live and get involved in the conversation by following the @VantageFX Twitter Account.

———-

On the Calendar Friday:
AUD RBA Monetary Policy Statement
JPY Monetary Policy Statement
JPY BOJ Press Conference

CAD Building Permits
CAD Employment Change
CAD Unemployment Rate
USD Average Hourly Earnings
USD Non-Farm Employment Change
USD Unemployment Rate
CAD Ivey PMI

———-

Chart of the Day:
A bit of #STUDY on a Friday as today’s chart of the day takes a look at the way price often reacts after breaking a trend line in a strongly trending market. We always hear how it’s safer to trade with the trend and this chart shows why.

NZD/USD Daily:
nu3
Click on chart to see a larger view.

With NZD/USD in a major daily down trend, when price started to head sideways on the lower time frames it’s human nature to at least consider buying the pair.

The trading text books tell us that when a trend line breaks and we get a re-test then price should kick on to new highs but rarely does this ever happen in practice. On the above chart we got the re-test, but price failed to make a new high and even though it was now broken, just continued to follow the trend line down.

Stick a post it note with the above chart drawn on it over the top of the trend line break page of your trading text book.

Let us know your thoughts on trading on mobile with or against the major trend by leaving a comment below or mentioning @VantageFX on Twitter.

Dane Williams – @VantageFX

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