Summer time is approaching and minor stories take the lead. Focus this week USD,Euro and a clear path for GBP.
After the disaster election in britain and a hung parliament GBP declined but quickly recouped once the prospect of a Government forming bolstered soft brexit talks. However prices crashed and will continue to tank as the leadership looks chaotic. Until we don’t see a new PM or confidence in the leadership GBP is a hard sell across all pairs. To make matters more concerning the Queen has postponed her speech, which hints at a power shuffle among the conservatives ranks.
Euro is enjoying stronger stability after Macrons cleanup in the French parliament. However Draghi is uncommitted to signal tightening,german yields heading lower and record unhedged Hedge fund euro longs (records not seen since 2007). Makes a case for euro dips.
USD is declining in anticipation of a dovish hike. There are several possible scenarios on how the rate decision and follow-up presser will turn out. But the most plausible thing for FED chair Yellen to do would be to make the ‘pace’ of further hikes data dependent and reiterate her commitment on %2 inflation target and balance sheet reduction. Should this be the case a USD dip and bottom out is the likely scenario.
Comdolls are strengthening, especially Canadian dollar after BOC deputy Gov. Wilkins hinted at tightening. At this stage it is all but an idea, more supporting data needed to make this bounce credible.
Oil is climbing on the back of possible stock revisions and political turmoil in the Persian Gulf.
Gold is falling as a rate hike would hurt the precious metal.
There are but a few main themes for market to focus on. FED presser needs to go out the way in order for investors to commit further.
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