I hope you had profitable trades this week.
I will start today with Sterling and the UK economy. We have been seeing a lot of improvement in the UK economy as far as the employment, PMI, Industrial Production are concerned. As a result of that, we witnessed an increase in the GBP in the beginning of the this week however it has been stable today with no much movement as most of the traders are waiting for Carney’s meeting tonight at 9:00 pm UK time as his comments might spark the short-term positive or negative trend. Many analysts think that Carney will increase the interest rates sometime before the Christmas or maybe before the elections next year (month of May) simply because the economy is doing well but personally I do not think we got good enough economic data for Carney to increase interest rates. I believe that BoE will postpone this decision until after the elections next year just simply because they do not want to obstruct the UK economy at the moment.
Last week we witnessed interest rates cuts in the euro-zone and more QE which will induce investors to hold the additional money balance and as a result will encourage companies to invest more. These steps are to push the Euro down to help the exports to increase. As a result, traders start selling Euro and buy commodity currencies like NZD and AUS. In terms of the AUDUSD, we saw an increase to 0.94 levels and I think it might break the last few months range (0.92 – 0.945) heading north. Same in NZD especially after last night’s news in terms of the interest rates as we might see more upward moves.
That brings us back to the EURUSD as it is trading in a range between (1.35-1.36) as we might see some upward movement as it is correlated with GBPUSD since we are still waiting for more good news from Europe to bring it lower in the next few weeks until it reaches 1.32 or 1.30 by the end of the year.
We are not seeing much volatility in the market in the last couple of weeks because everyone is waiting for the Federal Reserves meeting next week where we might see a lot of movement and volatility. Also, we might see some decline for the USD next week simply because of the JPY has strengthened this week.
Currently, I am short EURJPY and EURGBP to get 45 pips each and onside and looking for a good opportunity to buy GBPUSD on dips.
If you speak Arabic, I was on CNBC Arabia this morning for market analysis
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Have a great weekend and good luck trading,
Head of Operations at Savi Trading