Bank Of England Acts…But Here’s What You Should Be Doing
FX will likely remain a range traders market
as the countdown continues to Friday’s Payroll Data. Depending on your
temperament, the best place remains the sidelines with regards to risk/reward.
We have one open position, short EUR/CAD from 1.5996.
Overnight
saw the Bank of England (BOE) raise rates by 25 bp’s, the GBP/USD fell on
this news likely due to concerns that further rate hikes will not be as quick as
had been expected. Meanwhile the ECB left rates unchanged on the heels of
weaker than expected data out of Germany. This from Bank of America FX:
“German
orders came in very weak, —3.5%mm versus —0.6%mm Bloomberg consensus. However,
the
government says the numbers are likely to be revised up. Also, this
number comes after very strong gains in the month before. At the margin, an
argument for the ECB to stay on hold in the 2H to watch how external + domestic
demand develop. German Jun orders details: export orders —6.5%mm, domestic
orders —0.8%mm; drop in external orders comes after bulk orders (aircraft
components etc) had helped to boost export orders 4.0%mm in May and 3.4%mm Apr.
Export orders still up 5.5%yy, domestic orders +2.9%yy. The ECB left rates
unchanged today. The euro fell below the 1.2045 mark during the London morning
session.â€
Technically there are still set-ups in the making,
however data on Friday will either be the catalyst for entry or force us to go
back to the drawing board and re-evaluate based on the “new†landscape. We
favor shorts in EUR/GBP and AUD/USD as medium-term trades and long USD/JPY.
However, as of this morning, we do not see a favorable entry point.
FX Levels for Thursday
CHF:
1.2830, 1.2782, 1.2730
EUR:
1.2026, 1.1990, 1.2092
EUR/JPY:
133.64-133.86, 134.28, 134.57
As always, feel free to send me your comments and questions.