Bank of England minutes out at 9.30 UK time today. The bullish tone to GBP just prior to Carney’s speech and since should remain. I think any movement in interest rate stance , voting patterns (did anyone vote for a rate hike now) and rate movement (any more signs of when they are likely to pull the trigger) will be well addressed. With this in mind it is always best to tread cautiously on the minutes announcement given the risk reward angle (one of the MPC members already voting for a rate hike). Any 9-0 vote will not cause too many ripples but not enough to keep GBP on the front foot. I would cautiously buy GBP at these levels and then look for a break of 1.7040-45 which is a 5 year high, which to me signals the break is solid. Cable Support 1.6915-25 Resistance 1.7010 1.7040-45
EUR/GBP will follow the lead of the GBP/USD. While the EUR zone remains in the doldrums for now, it is essential that the focus remains on the GBP. The mere fact that we have opened this morning in positive territory and in such close proximity to psychologically important “break” levels leads me to believe that the market is preparing itself for a knee jerk move before settling down and digesting the news. It will be interesting if nothing else. One thing is for sure if the vote was 9-0, GBP will fall back before finding its feet again (wobble shock). Support still at 0.7950 , 0.7920 Resistance 0.8020-25.
EUR/USD teetering around 1.3550. For the past week most pundits (including myself) have been calling and looking for the EUR to break 1.3500. I think Yellens FOMC comments tonight could very well bring that to the fore as we are likely to get a better idea of when they are likely to change their Monetary policy. If you asked me at the begining of the year my thoughts on the USD I would have said BUY IT. Granted for the first 6 months I would have been sweating some!! I think the next 6 months are likely to bring out the USD bulls en masse with talk of rate hikes on the distant horizon. 1.3480 for me is the crucial level to get through and stay under before we see another leg lower. However this morning’s MPC minutes could have it’s parade rained on. The best way to take advantage of this is BUY OPTION GAMMA (short dated options).
USD/ZAR has broken through 2wk triangle resistance at 10.8075. This should provide the fuel to make a move to 11.0600. USD/ZAR has potentially resumed its long term bear trend in our opinion after disastrous economic numbers showing the Country is lagging massively behind its BRIC members. The mining strike has had a marked effect on the ground. My view is that USD/ZAR could very well be on its way to new 2014 highs of11.3915 reached on January 30th this year. As I write this CPI has just been published at +0.2% (consensus 1.00%) which moved the ZAR from 10.8350 to 10.7950 (Currently 10.8050)
Have a good day ahead and let’s be careful out there