Last week the price action was dominated by fundamentals:
- JPY strongest – all the gains after the central bank, Bank of Japan (BOJ), failed to meet market expectations by easing monetary policy (e.g. no additional QE and no interest rate cut)
- NZD strong – all the gains followed the central bank, Reserve Bank of New Zealand (RBNZ), failed to cut interest rates, disappointing NZD dollar bears.
- AUD weakest – all the week’s losses came right after the much lower than expected Aussie CPI release (increased the chances of an interest rate by the central bank – the Reserve Bank of Australia (RBA).
The NZDJPY pair increased 100 when the New Zealand Central Bank left monetary policy unchanged (no news) and then NZDJPY decreased 200 points when the Japanese Central bank left monetary policy unchanged (no news).
Of course both Central banks were expected to loosen monetary policy (lower interest rates directly or indirectly) and so their inactions was actually news!
Yes. We reviewed past UK GDP releases and saw that the GBPUSD pair was volatile even if the news was as expected.
Our news trade strategy was if the news was expected and there is downside volatility that would be normal and an
opportunity to buy GBPUSD. Worked great!
Well, after the bearish news the first chance to sell was 0.7700.
The RTG (room to go) down looked like about 0.7677 but that would be for a “normal” day.
This is a news day so perhaps another 30 pips down is reasonable.
Bottom line: Assuming a stop loss above the pre-news price (say 0.7770).
About a 50/50 bet.
Turned out to be a good sell as AUDUSD reached 0.7580 (not shown here)
Fundamentally, last week the GBPUSD pair shook off bearish employment, bearish average earnings, and bearish retail sales.
Technically, the daily chart looked ready to breakout to the upside, which it did on Monday