Analys från DailyFX
FTSE 100: BoE Tomorrow; Buy the Rumor, Sell the News
What’s inside:
- FTSE 100 held support, moved to 10-month highs
- FTSE looks to have priced in a BoE rate cut/stimulus
- ‘Buy the rumor, sell the news’ a likely scenario
On Friday, we took a look at the FTSE 100 and expressed our bullish short-term bias given it broke above major resistance and was now successfully holding the 6400s – old resistance became new support. The consolidation/pullback period ultimately led to a new high and the best levels in 10 months.
The Bank of England will release its decision on monetary policy tomorrow at 11:00 GMT time, which is likely to spark sizable volatility.
The catalyst for the FTSE to accelerate through resistance on June 30 was the BoE’s Carney hinting towards a summer stimulus package. The FTSE 100, which consists largely of international companies and benefit from a weaker pound, appeared to have been front-running Carney’s speech by retracing all the losses as a result of the ‘Brexit’ outcome. The domestically focused mid-cap FTSE 250 index has also seen good buying of late, but still remains much weaker than its internationally focused counterpart due to its high exposure to the British economy.
Now that the FTSE 100 is roughly 17% higher than where it was at the lows on June 24, it is reasonable to conclude the market has priced in actions to be taken by the BoE. Market expectations are for a 25 bps cut in the benchmark rate to 0.25%. With that in mind, our interest lies in how the market responds. A ‘buy the rumor, sell the news’ scenario has become increasingly likely with the rally becoming extended into tomorrow’s decision.
The market may not fall out of bed, but a decline back towards the 6400s seems reasonable to expect in the short-run. Should we see another shot higher in response to the the BoE, resistance comes in at the August peak of 6767 and then the July 2016 high at 6813. In any event, weakness immediately or shortly thereafter tomorrow’s announcement is a reasonable expectation.
FTSE (UK100) Daily
Check our Q3 forecasts for FX, commodities, and indices and other helpful trading guides here.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
You can email Paul at probinson@fxcm.com.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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