ridethepig | GBP Market Commentary 2020.02.11
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A timely update to the FX strategy for GBP with particular focus on Cable.
On the UK side, we have loud messages from Europe around the difficulty for both sides to reach an agreement by year-end. Although typical in a game of high-stakes chess, this is a heavy weight on Sterling.
On the US side, a solid round of data prints last week from wages to non-agricultural employment. The FED remains dovish and in cutting mode, in normal circumstances cuts would be difficult to justify but with Trump in full control market expectations do not favour USD walking forward.
On the technicals the map is crystal clear until we enter into the Brexit impact leg:
Strong Support 1.276x <=> Soft Support 1.290x <=> Mid Point 1.328x <=> Soft Resistance 1.38xx <=> Strong Resistance 1.43xx
On the positioning side, Pound longs were mostly built by speculators in the back-end of 2019 and these began to unwind as we headed into the official finish line in Jan 2020. This is leaving the flows exposed to negative headlines although you can argue the case for further upside as long as strong economic prints continue. The Pound is relatively cheap in this environment, I suspect the main impact leg from Brexit will not kick-in till October 2020 so we have plenty of time to continue working both side in the next 6 months.
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Expecting a mild recovery to come in the months ahead which will aid in offshore ownership of UK assets, the desire is there to continue the recovery and as long as this remains the case the breakdown will be difficult. Look to add GBP exposure on dips while we are at the bottom of the short-term and medium term range. A breakdown will be a game changer and will imply BOE are moving in August.
A round of G10 FX charts and strategy updates coming over the sessions today... Don't forget to keep the likes and comments rolling guys!
On the UK side, we have loud messages from Europe around the difficulty for both sides to reach an agreement by year-end. Although typical in a game of high-stakes chess, this is a heavy weight on Sterling.
On the US side, a solid round of data prints last week from wages to non-agricultural employment. The FED remains dovish and in cutting mode, in normal circumstances cuts would be difficult to justify but with Trump in full control market expectations do not favour USD walking forward.
On the technicals the map is crystal clear until we enter into the Brexit impact leg:
Strong Support 1.276x <=> Soft Support 1.290x <=> Mid Point 1.328x <=> Soft Resistance 1.38xx <=> Strong Resistance 1.43xx
On the positioning side, Pound longs were mostly built by speculators in the back-end of 2019 and these began to unwind as we headed into the official finish line in Jan 2020. This is leaving the flows exposed to negative headlines although you can argue the case for further upside as long as strong economic prints continue. The Pound is relatively cheap in this environment, I suspect the main impact leg from Brexit will not kick-in till October 2020 so we have plenty of time to continue working both side in the next 6 months.
Expecting a mild recovery to come in the months ahead which will aid in offshore ownership of UK assets, the desire is there to continue the recovery and as long as this remains the case the breakdown will be difficult. Look to add GBP exposure on dips while we are at the bottom of the short-term and medium term range. A breakdown will be a game changer and will imply BOE are moving in August.
A round of G10 FX charts and strategy updates coming over the sessions today... Don't forget to keep the likes and comments rolling guys!
Nota
Updates on the UK chancellor front giving a spike through 1.30xx ... a good fading opportunity for those trading the ST risk flows in play Nota
All longs cleared on the spike and here switching sides as we have a game changer update to the Treasury in the UK. Fiscal taps are on... Check the latest portfolio positioning here: 
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