*Good morning/afternoon everyone!* The U.S. dollar is trading lower against most of the major currencies this morning as risk appetite improves after yesterday’s brutal selling. Stock futures are up, helping to bolster pairs like EUR/USD and USD/JPY. However as we begin the NY session, the decline in Treasury yields could also tip the scale and push USD/JPY lower. Yen crosses on the other hand will take their cue from stocks today. The currency most vulnerable to weakness is the Canadian dollar because oil prices are down more than 2% after President Trump tweeted that he hopes Saudi Arabia and OPEC will not cut oil production because he thinks oil prices should be much lower based on supply. Despite a softer Eurozone ZEW survey, EUR/USD is trading above 1.1250 on the hope that progress could be made on the Italian budget front. the expectations component of the ZEW surely also increased. The best performing currency this morning is sterling which is up on higher wages (despite a higher unemployment rate) and continued Brexit optimism. On the Brexit front, we are getting closer to a deal but with some counterproductive headlines, traders are still reluctant to overload sterling positions but when an announcement is made, we can almost be assured that there will be a strong followup rally. AUD and NZD are also up from yesterday but having risen strongly in Asian trade, they are mostly consolidating and even weakening slightly. We also have our eyes on the Swiss Franc which appears to be topping below 1.0130. *The MAIN THEMES I see today are* +EUR +CHF -CAD -JPY *Trading Biases* +EUR, +CHF, +GBP, -CAD, -JPY mildly +AUD, +NZD, -USD *Today’s Initial Trades* Here’s the summary – 1. Buy EURCAD at 1.4885, Stop at 1.4857, Target 1.4912 2. Buy EURUSD at 1.1247, Stop at 1.1219, Target 1.1275 3. Buy AUDCAD at .9531, Stop at .9503, target .9559 4. Sell AUDCHF at .7270, Stop at .7298, Target .7242

Swing

*Good morning/afternoon everyone!*

The U.S. dollar is trading lower against most of the major currencies this morning as risk appetite improves after yesterday’s brutal selling. Stock futures are up, helping to bolster pairs like EUR/USD and USD/JPY. However as we begin the NY session, the decline in Treasury yields could also tip the scale and push USD/JPY lower. Yen crosses on the other hand will take their cue from stocks today. The currency most vulnerable to weakness is the Canadian dollar because oil prices are down more than 2% after President Trump tweeted that he hopes Saudi Arabia and OPEC will not cut oil production because he thinks oil prices should be much lower based on supply. Despite a softer Eurozone ZEW survey, EUR/USD is trading above 1.1250 on the hope that progress could be made on the Italian budget front. the expectations component of the ZEW surely also increased. The best performing currency this morning is sterling which is up on higher wages (despite a higher unemployment rate) and continued Brexit optimism. On the Brexit front, we are getting closer to a deal but with some counterproductive headlines, traders are still reluctant to overload sterling positions but when an announcement is made, we can almost be assured that there will be a strong followup rally. AUD and NZD are also up from yesterday but having risen strongly in Asian trade, they are mostly consolidating and even weakening slightly. We also have our eyes on the Swiss Franc which appears to be topping below 1.0130.

*The MAIN THEMES I see today are*

+EUR
+CHF
-CAD
-JPY

*Trading Biases*

+EUR, +CHF, +GBP,
-CAD, -JPY
mildly +AUD, +NZD, -USD

*Today’s Initial Trades*

Here’s the summary --

1. Buy EURCAD at 1.4885, Stop at 1.4857, Target 1.4912
2. Buy EURUSD at 1.1247, Stop at 1.1219, Target 1.1275
3. Buy AUDCAD at .9531, Stop at .9503, target .9559
4. Sell AUDCHF at .7270, Stop at .7298, Target .7242

BK GBP/USD Big Trade – Stopped Out

Swing

BK GBP/USD Big Trade -- Stopped Out at 1.5265


***BK GBP/USD Big Trade Entry 1 TRIGGERD to Buy 1 Lot GBPUSD at 1.5478. Place Order to Buy 1 More Lot at 1.5335 Stop at 1.5265

GBP/USD Big Trade – The BoE Rate Hike Trade

The Trade:

GBP/USD

BK GBP/USD Big Trade Entry 1+2 TRIGGERD to Buy 1 Lot GBPUSD at 1.5478. Buy 1 More Lot at 1.5335 Stop at 1.5265 Average now 1.5406

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

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Bank of England Officials Still Talking About Raising Rates

There are only two major central banks talking about raising interest rates right now. One is the Federal Reserve and the other is the Bank of England. Both central banks see the current decline in inflation as temporary and while “dis-inflation” is a bigger problem in the U.K. than in the U.S., U.K. officials are more worried about wage growth.

We are not looking for the Bank of England to raise rates immediately but rate hike expectations should adjust after the recent improvements in U.K. data and hawkish comments form U.K. policymakers.

On Tuesday, we heard from BoE Governor Carney and Fed Chair Yellen. In contrast to Yellen who is in no rush to raise interest rates, U.K. officials are growing more concerned about wage growth. Yesterday, we heard from Carney, Weale and Forbes, all of whom seem to see the need for tightening. Carney did not talk about monetary policy specifically but he is one of the more hawkish members of the central bank. Forbes on the other hand said wage growth is picking up and there is limited slack in the economy. She felt that rates will have to rise at some point and a gradual increase should support the economy. Weale agreed that recent data confirms that pay pressures are building and monetary policy should be based on expected not current inflation. As a result, he felt that rates could rise sooner than the markets expected. Clearly, the majority of U.K. policymakers are leaning towards higher rates and we think this will drive sterling even higher.

Chart – GBP/USD Bottom

GBP/USD is currently attempting to break above 1.55 and we firmly believe that it will not only do so but trade as hit a minimum of 1.56. However we should get an opportunity to buy the currency pair on a pullback to 1.5478. If it continues to fall, another good place to add to our position would be right above the 23.6% Fibonacci retracement of the 2007 to 2009 decline with a stop at 1.5265.

GBPUSD022515

GBP/USD
Place Order to Buy 1 Lot GBP/USD at 1.5478

Place Order to Buy 1 Additional Lot at 1.5335

Stop at 1.5265

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

BK GBP/USD Big Trade – Not Triggered

Swing

GBP/USD Big Trade – The BoE Rate Hike Trade

The Trade:

GBP/USD

Place Order to Buy GBP/USD at 1.5280

This is a Stop Entry, which means we are buying a break higher.

Stop at 1.5030

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.


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Next Move for Sterling will be Decided by Bank of England Minutes

Unprecedented times call for unprecedented measures and we are living in a period where central banks around the world feel the need to drop interest rates to negative levels in order to deter investment and to stimulate their economies. In this environment yield and return is truly a premium. When it comes to the outlook for currencies there is nothing more important than the direction that interest rates are headed and if tomorrow’s BoE minutes show a central bank unfazed by the recent dip in inflation and slowdown in economic activity, the British pound could be headed much higher.

Although GBP/USD has been holding up well compared to other major currency pairs, the fact that it is trading near 1 year lows indicates that investors are bracing for the worst. Rate hike expectations have been pushed back from mid 2015 to 2016 in some cases. With manufacturing, service and construction sector activity slowing in an environment of falling prices, a later rate hike would be justified. Not all news was bad however as retail sales and average hourly earnings rose. The market is bracing for dovish minutes and if the BoE proves otherwise, it would be a big surprise for sterling. In other words, the surprise trade is to the upside and that’s where we want to be.

In December two Monetary Policy members voted to raise interest rates. If McCaffery and Weale continue to push for policy normalization and the minutes are hawkish, we could see a bottom in GBP/USD with a potential squeeze up to 1.55. In addition to the minutes, the latest employment numbers are also scheduled for release. According to the PMIs, labor market conditions continued to improve pointing to positive data.

Important Trading Tactics

It is important to note that we are BUYING GBP/USD above market at 1.5280. Do not buy if the currency pair is below this rate because we are buying strength not weakness.

Chart – GBP/USD Bottom?

Place Order to Buy GBP/USD at 1.5280

This is a Stop Entry, which means we are buying a break higher.

Stop at 1.5030

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

USD/CAD Ahead of Bank of Canada Rate Decision

USD/CAD Ahead of Bank of Canada Rate Decision

Chart Of The Day

USD/CAD Ahead of Bank of Canada Rate Decision

Fundamentals

The next major central bank announcement will be from Canada, which is why USD/CAD is in play for the next 24 hours. On the eve of the rate announcement, the currency pair hovers not far from its 5 year high. Two months ago, the BoC dropped the word neutral from their monetary policy statement, fueling bets that they are more open to the idea of raising interest rates. However there is very little chance that Canada will raise rates before the U.S. and the Federal Reserve is not slated to tighten until the middle of next year at the earliest. While the labor market has seen dramatic improvements leading to a pickup in retail sales and inflation is on the rise, manufacturing and trade activity along with Q3 GDP growth fell short of expectations. Oil prices also dropped more than 17% since the last monetary policy meeting. Therefore we don’t expect any renewed optimism from the BoC and if instead they express concerns about the volatility of oil, USD/CAD could test its 5 year high of 1.1467.

Technicals

Taking a look at the monthly chart of USD/CAD if the currency pair breaks its current 5 year high of 1.1467, 1.15 will serve as near term resistance but 1.1540, the 38.2% Fibonacci retracement of the 2007 to 2009 rally will be the key level to watch. On the downside, 1.12 remains support for USD/CAD.