The Weekly Update: Fed Monetary Policy and Article 50

GBPUSD Trading Strategy

The Euro rose against a basket of currencies as we initially expected but were unable to capitalize on the move. There were several speculations that suggested the EURCHF tick higher was related to the Swiss National Bank (SNB) but we will find it difficult to believe if it was as a result of an intervention. An intervention would often weaken CHF against a basket of currencies rather than against a single currency.

The market is beginning to anticipate some action from the SNB, which we have been expecting for quite some time. A suggestion for the strong Euro are speculations the ECB is considering a rate hike during the current QE program. The two main events this week are the Fed monetary policy and the possibly the UK triggering article 50 this week.

Due to immense pressure on the Fed to hike rates it is highly likely a rate hike will take place although it was unexpected due to the European political tension that is beginning to unravel. As a hike is already priced in, focus will be on the accompanying statement.

From a fundamental angle the Fed may refrain from triggering a strong USD in the Forex market, which may be achieved by a hike of less 25bps or as we suggested in our prior updates in an event of a rate hike, a dovish statement in regards to future rate hikes. At the time of this writing there are no indications for broad USD strength in the medium term.

GBPUSD Weekly Chart

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GBPUSD Weekly Chart 12/03/17

As we updated on Friday, we were looking for a low daily close in GPBUSD. A lower close would have eliminated the possibly of further weakness, however, it is sufficient to initiate a long trade. The key level is 1.2093. if the price level gives way we may witness GBPUSD pushing lower towards 1.2000. If any weakness takes place it may be better if it takes place prior to the Fed monetary policy. As the triggering of Article 50 is already priced in we are opting for GBPUSD.

GBPUSD Trade Alert

GBPUSD long at market price (1.2158)
Take profit: 1.2675
Protective stop: 1.1980
Risk Ratio (RR): 1 : 2.8 (approx.)
Estimated duration: 25 days

EURGBP Trade Alert

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EURGBP Monthly Chart 14/03/17

EURGBP short at market price (0.8746)
Take profit: 0.8385
Protective stop: 0.8870
Risk Ratio (RR): 1 : 3 (approx,)
Estimated duration: 30 days

15/03/17 UPDATE: GBPUSD is trading at 1.2291 at the time of this writing, we are closing 30% of the long trade at market price, we may shift the stop to the entry after the daily close (stop was later shifted to the entry).

16/03/17 UPDATE: GBPUSD is trading at 1.2354 at the time of this writing, we are closing 20% of the long the trade at market price. EURGBP is trading at 0.8678 at the time of this writing, we are closing 20% of the short trade at market price.

17/03/17 UPDATE: GBPUSD has re-tested its nearest resistance. Should GBPUSD fail to close above 1.2400 by the daily close we must be prepared for a potential -100 pips retracement (which may or may not materialize) before a resumption of the uptrend. We are fairly reluctant to exit the trade as it is a weekly entry. Although we are not pleased with the fact we require to downsize the trade, however, we must acknowledge the re-test and adjust in accordance. As a precaution, we are closing 20% of the long trade at market price (1.2366).

19/03/17 UPDATE: EURGBP is trading at 0.8563 at the time of this writing.

Please click on the chart to enlarge:

EURGBP Monthly Chart 19/03/17

We are closing 10% of the short trade at market price and shift the protective stop 0.8755.

21/03/17 UPDATE: The UK CPI triggered mild gains in GBP pairs and crosses.

Please click onthe chart to enlarge:

GBPUSD Weekly Chart 21/03/17

We decided to close GBPUSD long trade at market price (1.2447) as we have a sufficient exposure to GBP.

21/03/17 UPDATE: We are shifting EURGBP protective stop to 0.8745.

23/03/17 UPDATE: EURGBP is trading at 0.8606 at the time of this writing.

Please click on the chart to enlarge:

EURGBP Monthly Chart 23/03/17

We are closing 30% of the short trade at market price.

24/03/17 UPDATE: We are closing 10% of EURGBP short trade at market price (0.8652), stop was shifted to 0.8740.

28/03/17 UPDATE: The intraday outlook for other GBP pairs and crosses is mixed, which suggests we may witness a whipsaw reaction before a weak GBP. We cannot lower the stop as it may not hold in such a reaction.We will admit this was a tough decision to make but we cannot ignore these technical signals unless we shift the stop back to its original location, which we are reluctant to do.

We are closing EURGBP short trade at market price (0.8552). We are unlikely to short GBP.

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.