GBP/USD: Trading Brexit (FIST Analysis)
Happy Friday traders!
Time to make an update on GBP/USD. Here is a FIST (Fundamental, Intermarket, Sentiment, Technical) analysis of the pair ahead of the NFP and potential trade deal.
FUNDAMENTALS
Services and Manufacturing PMIs in the UK came in better than expected, but the main market theme is still whether the UK and the EU will reach a trade deal over the weekend.
Some reports show a deal is "imminent", but France is still playing hard on the fisheries front, demanding access to UK fishery waters. Btw, fishery accounts for a fraction of a percent in UK's GDP.
In the US, we are waiting for NFP numbers. ADP numbers came in weaker, while unemployment claims came in better. NB: Goldman Sachs expects a number around 450k (are they looking for selling pressure from dumb money to get into USD longs? We will see)
CLUES FROM INTERMARKETS
2-year yield differentials point at a lower GBP/USD. Higher demand for UK bonds pushes UK interest rates lower, signaling flight to safety ahead of the trade deal deadline.
WHAT DOES MARKET SENTIMENT SAY?
Fast money (hedge funds) increased short positions in the GBP for the fourth week in a row. However, there is still room to the upside until we see a 52w extreme positioning. This means that there is still room to the downside for the GBP, but also to the upside (short squeeze).
TECHNICALS
As expected, the pair remains range-bound and trades around the point of control, signaling fair value at the moment.
In case of a deal, I see 1.36 as the first profit target (bull flag target, 1.00 Fib extension), followed by the upper 1.36xx levels (1.272 Fib extension).
A no deal scenario should at least see the lower 1.31xx levels, where we have a major liqudity zone and where large buyers could join the market again.
== SUMMARY ==
I don't trade on Friday, and I don't trade if there are event risks. Trading a deal/no-deal scenario is gambling.
Instead, wait for the outcome, let the market pick a direction, and look for pullbacks to get into the position.
Please hit the "LIKE" button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
Time to make an update on GBP/USD. Here is a FIST (Fundamental, Intermarket, Sentiment, Technical) analysis of the pair ahead of the NFP and potential trade deal.
FUNDAMENTALS
Services and Manufacturing PMIs in the UK came in better than expected, but the main market theme is still whether the UK and the EU will reach a trade deal over the weekend.
Some reports show a deal is "imminent", but France is still playing hard on the fisheries front, demanding access to UK fishery waters. Btw, fishery accounts for a fraction of a percent in UK's GDP.
In the US, we are waiting for NFP numbers. ADP numbers came in weaker, while unemployment claims came in better. NB: Goldman Sachs expects a number around 450k (are they looking for selling pressure from dumb money to get into USD longs? We will see)
CLUES FROM INTERMARKETS
2-year yield differentials point at a lower GBP/USD. Higher demand for UK bonds pushes UK interest rates lower, signaling flight to safety ahead of the trade deal deadline.
WHAT DOES MARKET SENTIMENT SAY?
Fast money (hedge funds) increased short positions in the GBP for the fourth week in a row. However, there is still room to the upside until we see a 52w extreme positioning. This means that there is still room to the downside for the GBP, but also to the upside (short squeeze).
TECHNICALS
As expected, the pair remains range-bound and trades around the point of control, signaling fair value at the moment.
In case of a deal, I see 1.36 as the first profit target (bull flag target, 1.00 Fib extension), followed by the upper 1.36xx levels (1.272 Fib extension).
A no deal scenario should at least see the lower 1.31xx levels, where we have a major liqudity zone and where large buyers could join the market again.
== SUMMARY ==
I don't trade on Friday, and I don't trade if there are event risks. Trading a deal/no-deal scenario is gambling.
Instead, wait for the outcome, let the market pick a direction, and look for pullbacks to get into the position.
Please hit the "LIKE" button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
