The Weekly Update: Mark Carney and GBPCAD

Mark Carney and GBP

One of the more interesting events that took place last week were Mark Carney’s remarks on the Bank of England (BOE) monetary policy. The market priced-in a rate hike in May 2018. Carney suggested that a rate hike is not guaranteed to take place in the next BOE monetary policy meeting, which triggered the selling across GBP pairs and crosses.

Mark Carney’s speech on Friday may gain more attraction this week as he may attempt to rekindle the market’s expectations for the central bank to hike rates in May.

Although the following is irrelevant to the market it was worth noting that according to some reports the military strike against the Syrian regime was meant to be significant, Mattis was against the strike, which was later toned down and as a result no volatility was noted in global markets.

GBPCAD Signal Strategy

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The Weekly Update: Mark Carney and GBPCAD

GBPCAD Weekly Chart 22/04/18

The short entry which we established our trade in the cross some time ago was invalidated by the market. As a result GBPCAD paved the way for stronger gains within the next several months.

The entry itself is not fully aligned with other CAD pairs and crosses. It is challenging to determine what may trigger a rally in the cross (strong GBP or weak CAD). The initial gains may be due to GBP, however, it may take some time for the price to lift higher. We may have some indication later this week from other crosses on the progress of the entry.

Mark Carney has already reversed his remarks in the past to prevent heavy selling in GBP. His speech on Friday may have some impact on GBPCAD but we would rather see a weak CAD. A short entry is brewing in GBPCHF. Our assumption is that the potential weakness in GBPCHF may suggest a weak USD rather than a weak GBP.

It is still early to conclude how GBPCHF will trade over the next several weeks but should we suspect it may be as a result of a weak GBP we will take action should we opt for GBPCAD after the opening of the Foreign Exchange (Forex) market.

GBPCAD Trade Alert

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The Weekly Update: Mark Carney and GBPCAD

GBPCAD Weekly Chart II 22/04/18

GBPCAD long at market price (ask 1.7879)
Take profit: 1.8515
Protective stop: 1.7580
Risk Ratio (RR): 1 : 2.1 (approx.)
Estimated duration: 30 days (approx.)

Relevant as long as GBPCAD is below 1.7930

Note: The potential drawdown is a re-test of 1.7650. It is not what we refer to as a ‘cheap’ stop but we cannot opt for a tighter protective stop. If timed correctly fairly strong gains may be seen by the end of the week.

As this is a weekly entry some drawdown may be seen although it is not guaranteed.

26/04/18 UPDATE: We are closing 10% of the long trade at market price (1.7917). The partial closure is intended to reduce the holding costs of the long trade.

29 April Update

GBPCHF short entry we discussed kicked into play due to a weak GBP. The UK GDP on Friday triggered strong GBP selling in the market, Carney’s remarks had little impact on the market.

We re-assessed GBP pairs and crosses, GBP is still positioned to correct higher at the time of this writing. We have a choice between increasing our exposure to GBP (via GBPAUD) or alternatively shorting USD as discussed in the strategy. A long entry may be present in EURGBP, however, it may suggest a firmer Euro.

Initiating a long trade in EURUSD is fairly expensive due to the swap at the rollover. We are leaning towards AUDUSD but we will present the entries that are currently present in the market. USDCAD may also be positioned for corrective weakness, should GBP fail to correct higher at the beginning of the week GBPCAD may struggle to pare its losses.

EURUSD Weekly Chart

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The Weekly Update: Mark Carney and GBPCAD

EURUSD Weekly Chart 29/04/18

AUDUSD Daily Chart

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The Weekly Update: Mark Carney and GBPCAD

AUDUSD Daily Chart 29/04/18

USDCHF Daily Chart

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The Weekly Update: Mark Carney and GBPCAD

USDCHF Daily Chart 29/04/18

USDCAD Daily Chart

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The Weekly Update: Mark Carney and GBPCAD

USDCAD Daily Chart 29/04/18

GBPAUD Daily Chart

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The Weekly Update: Mark Carney and GBPCAD

GBPAUD Daily Chart 29/04/18

Aside the above charts there may also be long entries in EURGBP, GBPNZD, GBPUSD and NZDUSD.

AUDUSD Trade Alert

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The Weekly Update: Mark Carney and GBPCAD

AUDUSD Daily Chart II 29/04/18

AUDUSD long at market price (ask 0.7579)
Take profit: 0.7730
Protective stop: 0.7510
Risk Ratio (RR): 1: 2.2 (approx.)
Estimated duration: 14 days

Note: We are noting the risk for a retracement towards to 0.7548 before correcting higher. This is a retracement we are willing to absorb should it materialize. The risk for such a retracement is higher than usual but we must highlight that it is not guaranteed to materialize.

EUUSD may have greater support, however, the negative swap is unattractive bearing in mind we are already holding a long position in GBPCAD.

The Fed monetary policy later this week may be the trigger. If GBPCAD was not heavily sold we would have increased our exposure to GBP. Increasing our exposure to GBP today would have been reckless regardless of the outcome.

The economic data from China (due during the Asian session) is the key data for AUD.