Tuesday, May 20, 2014

Cable (GBPUSD) waiting for action | Bank of Japan does…very little

The British pound (GBPUSD), otherwise known as Cable, is in a well-defined upward sloping channel, as can be seen from the chart above. We held a position in this but exited it when price came close to 1.70, which has since stayed in place as a resistance level. Remember the significance of nice round numbers on the collective market psyche.

We have set the Mandelbrot routine to monitor this pair and it will enter the market again, with a long order, when and if it gets the required signal. We would ideally like that point to be closer to the bottom of the channel. The Bank of England minutes from its last Monetary Policy Committee (MPC) meeting are due to be released later this morning and they could provide the catalyst for a move. In the meantime we wait.

Bank of Japan does…very little

We have also been waiting patiently for something to happen with the Dollar Yen pair (USDJPY). (See yesterday’s commentary). At the time of this writing the Bank of Japan has just released its Monetary Policy Statement. There was no change to the interest rate, as expected, and the statement contained some words relating to capital flows, all of which did nothing, one way or the other, for USDJPY.

As noted previously, the Yen is sensitive to the movement of the Nikkei share index. This has been soft of late, which tends to strengthen the Japanese currency. This would have the effect of lowering the USDJPY rate so unless the BoJ press conference, now under way, comes out with words that weaken the Yen (cause the USDJPY pair to rise), the bias in this pair has to be to the downside.

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