GBP Trading Strategy: The BOE Monetary Policy

GBP has rallied against a basket of currencies since Theresa May (British PM) announced snap elections, scheduled to take place in June, 2017. The market reaction to Macron proceeding to the second round of elections (which we expected to take place in the second round) elevated GBP further against a basket of currencies. The UK general elections are already priced-in, the key trigger is the Bank of England (BOE) monetary policy. The central bank is unlikely to act prior to general elections despite the wide expectations for the Conservatives to win the elections. Due to recent GBP strength the central bank may choose to wait for the outcome of the general elections and the brexit negotiations to begin before deciding whether rates should be hiked.

GBPCAD Weekly Chart

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GBP Trading Strategy: The BOE Monetary Policy

GBPCAD Weekly Chart 09/05/17

Aside GBP, OPEC meeting on 25 May may be the trigger for a strong CAD. We initially expected a 9 month extension to the current output cut but OPEC is signalling the extension may be larger. 1.7835 is a fairly strong monthly resistance that we expect to contain any attempts to break higher. We highlight GBPCAD is a volatile cross.

GBPAUD Weekly Chart

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GBP Trading Strategy: The BOE Monetary Policy

GBPAUD Weekly Chart 09/05/17

Aside GBP there are still technical indications that suggest AUD may correct higher. As the gains appear imminent, we suspect China CPI may boost AUD against a basket of currencies. GBPAUD entry is more difficult than GBPCAD as 2 potential resistance levels are present. We cannot determine which resistance level may hold but we are likely to opt for the trade despite the potential for an open drawdown. We are relaying on AUD to provide the initial weakness in GBPAUD.

We also have a potential entry in EURGBP, however, we are concerned that once EURAUD, EURCAD and EURNZD will correct lower it may pressure the Euro. The EU has demanded its payment for the brexit in Euros, which means billions of pounds will be converted into Euros once the payment is made later this year. The payment itself, once the negotiations begin may have a significant impact on GBP in the Forex market.

GBPAUD Trade Alert

GBPAUD short at market price (1.7620)
Take profit:1.6830
Protective stop: 1.7880
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 30 days

Note: This is not a tight stop, we have layered the stop above the latter resistance rather than the nearest level based on the weekly chart.

GBPCAD Trade Alert

GBPCAD short at market price (1.7748)
Take profit:1.7235
Protective stop: 1.7970
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 30 days

Note: Similar to GBPAUD, this is not a tight stop but it is above the nearest resistance level.

10/05/17 UPDATE: GBPCAD is trading at 1.7669 at the time of this writing, we are closing 10% of the short trade at market price

11/05/17 UPDATE: GBPCAD is trading at 1.7643 at the time of this writing, we are closing 10% of the short trade at market price.

11/05/17 UPDATE II: GBPAUD is trading at 1.7457 at the time of this writing, we are closing 20% of the short trade at market price.

12/05/17 UPDATE: GBPAUD is trading at 1.7386 at the time of this writing.

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GBP Trading Strategy: The BOE Monetary Policy

GBPAUD Weekly Chart 12/05/17

We are closing 20% of the short trade at market price.

12/05/17 UPDATE II: GBPCAD is trading at 1.7614 at the time of this writing,

Please click on the chart to enlarge:

GBP Trading Strategy: The BOE Monetary Policy

GBPCAD Weekly Chart 12/05/17

We are closing 20% of the short trade at market price.

14/05/17 UPDATE: We are shifting GBPAUD protective stop to the entry, we are not modifying the protective stop in GBPCAD we still lack a sufficient distance from the market.

15/05/17 UPDATE: GBPCAD is trading at 1.7586 at the time of this writing, we are closing 20% of the short trade at market price.

Please click on the chart to enlarge:

GBP Trading Strategy: The BOE Monetary Policy

GBPCAD Weekly Chart 15/05/17

We are likely to shift the stop to the entry after the daily close once the spread stabilizes (stop was later shifted to the entrty).

17/05/17 UPDATE: The recent gains are related to a weak AUD rather than a firm GBP despite the employment data, As a precaution we are closing 10% of the short trade at market price (1,7499), stop remains at the entry.

17/05/17 UPDATE: We are closing 20% of the short trade at market price (1.7516), stop remains at the entry.

18/05/17 UPDATE: We are closing the remaining partial in GBPAUD at market price (1.7512). GBP gained momentum due to the retail sales, which triggered GBPCAD protective stop at the entry. We have nevertheless ended with a fair profit.

GBP Trading Strategy: The BOE Monetary Policy

As all trades are closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
GBP Trading Strategy: The BOE Monetary Policy
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GBP Trading Strategy: The BOE Monetary Policy