GBP Dominated the Week
Srdan Sore
This week was dominated by GBP as all pound pairs moved aggressively on the back of sterling volatility rising ahead of June Brexit vote. While there is still plenty of time until June, market is trying to already position for the outcome of the vote and trust us, there is going to be a lot of volatility... Read more
This week was dominated by GBP as all pound pairs moved aggressively on the back of sterling volatility rising ahead of June Brexit vote. While there is still plenty of time until June, market is trying to already position for the outcome of the vote and trust us, there is going to be a lot of volatility surrounding the event, both before it and after, with all eyes being on polls with market participants trying to guess the outcome. This week we had the pleasure to see the yearly inflation moving lower, yet again, in UK, printing 0.3% on the back of 0.4% expectations and the pound sold aggressively both before and after the release. The reason for the selling before the release come from the fact that the UK economy is fairly integrated into the global economy and it is difficult to believe that if the Eurozone and overall inflation in the world is falling, in UK will be different. In this way, market participants already knew what to expect, namely a lower inflation. USDCAD Squeezed Shorts If anything, this week was the week of the USDCAD as the pair squeeze from the lows below 1.30, to be more exact almost from 1.29, all the way to closing almost above 1.33 as Friday saw the 1.3280 area printed.  Everyone is talking now about the April 17 Doha meeting where OPEC countries and non-OPEC ones are supposed to freeze production and the USDCAD volatility will increase with each and every trading day until that meeting. US GDP Surprised to the Upside On Friday the US GDP was released and it was the Final GDP. The thing is that rarely the final release is different than the Advanced one, but this time it was. It printed 1.4%, way bigger than the anticipated one, and it meant that the US economy advanced ad a fastest pace in the last quarter of 2015. Normally such a news should have been met with an aggressive move higher on the US dollar all over the board but this did not happen. The reason for that was that the market was in holiday mood as Easter weekend was ahead and European banks were closed. It doesn’t change the fact that the GDP was strong and this should weigh instead on the Fed decisions moving forward. As a consequence, the USDJPY managed the performance of closing above the 113 level and this is important considering that only one week ago it was trading below 111, almost breaking the 110 mark.  NFP Week Ahead Next week is going to be an interesting one in the sense that we’re having two important events in front of us and this is all that matters: end of month on Thursday, followed by NFP on Friday. NFP is always released on the first Friday of each month and this time this Friday is coming on the 1st of April. So the whole next week we’re going to see market positioning for the event and after Thursday’s flows will be over, probably a range will follow. From my point of view the current situation should still be valid into the NFP release as well: EURUSD moving slowly to the downside together with AUDUSD, while USDJPY should keep a range between 114 and 110 as there is a triangle that is forming on the four hours chart and its time horizon goes well beyond NFP. Therefore, a possible trading strategy will be to look to fade the NFP, namely to buy put options in any spike higher in EURUSD and AUDUSD while call options on USDJPY on any dips are recommended.

GBP Dominated the Week

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This week was dominated by GBP as all pound pairs moved aggressively on the back of sterling volatility rising ahead of June Brexit vote. While there is still plenty of time until June, market is trying to already position for the outcome of the vote and trust us, there is going to be a lot of volatility surrounding the event, both before it and after, with all eyes being on polls with market participants trying to guess the outcome. This week we had the pleasure to see the yearly inflation moving lower, yet again, in UK, printing 0.3% on the back of 0.4% expectations and the pound sold aggressively both before and after the release.post banner bosr

The reason for the selling before the release come from the fact that the UK economy is fairly integrated into the global economy and it is difficult to believe that if the Eurozone and overall inflation in the world is falling, in UK will be different. In this way, market participants already knew what to expect, namely a lower inflation.

USDCAD Squeezed Shorts

If anything, this week was the week of the USDCAD as the pair squeeze from the lows below 1.30, to be more exact almost from 1.29, all the way to closing almost above 1.33 as Friday saw the 1.3280 area printed. 

Everyone is talking now about the April 17 Doha meeting where OPEC countries and non-OPEC ones are supposed to freeze production and the USDCAD volatility will increase with each and every trading day until that meeting.

US GDP Surprised to the Upside

On Friday the US GDP was released and it was the Final GDP. The thing is that rarely the final release is different than the Advanced one, but this time it was. It printed 1.4%, way bigger than the anticipated one, and it meant that the US economy advanced ad a fastest pace in the last quarter of 2015. Normally such a news should have been met with an aggressive move higher on the US dollar all over the board but this did not happen. The reason for that was that the market was in holiday mood as Easter weekend was ahead and European banks were closed. It doesn’t change the fact that the GDP was strong and this should weigh instead on the Fed decisions moving forward.

As a consequence, the USDJPY managed the performance of closing above the 113 level and this is important considering that only one week ago it was trading below 111, almost breaking the 110 mark. 

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NFP Week Ahead

Next week is going to be an interesting one in the sense that we’re having two important events in front of us and this is all that matters: end of month on Thursday, followed by NFP on Friday. NFP is always released on the first Friday of each month and this time this Friday is coming on the 1st of April. So the whole next week we’re going to see market positioning for the event and after Thursday’s flows will be over, probably a range will follow.

From my point of view the current situation should still be valid into the NFP release as well: EURUSD moving slowly to the downside together with AUDUSD, while USDJPY should keep a range between 114 and 110 as there is a triangle that is forming on the four hours chart and its time horizon goes well beyond NFP. Therefore, a possible trading strategy will be to look to fade the NFP, namely to buy put options in any spike higher in EURUSD and AUDUSD while call options on USDJPY on any dips are recommended.

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