Other than BoE which wrong footed most investors, we had some stellar news from the US. We expected the BoE to cut rates but instead only one MPC member-Jan Vlieghe, voted for a rate cut. Mark Carney conveyed this stating that members saw a need for patience as the repercussion of Brexit is assessed but they expected monetary policy to be loosened come August as a trade-off between stimulating growth and keeping inflation within manageable levels is reached. It is paramount to note that any BoE rate cut is like rate cuts by RBA and RBNZ and a rate hike by the Feds so, this is really a balancing act, a game of “monetary policy” implementation if we may say.
Other than that we saw Unemployment claims drop to 254K last week representing the longest run since 1973 the number of citizens applying for benefits has been kept below the 300K mark. This overly is good news for the US economy as it makes a recovery after it reeled in the first half of the year. Back to China, there is recovery as the real GDP grew by 6.2% YoY with retail sales spending also increasing above the 10% mark. Despite this, many analysts remain skeptical because of the delayed transition to consumer spending despite the government spending billions of Yuan to prop the inefficient state owned industries.
To the charts and this is what is happening as we close the week:
This week we have seen an obvious reversal in the daily chart with price action topping up at 0.73 before reeling and now trending in the 0.715 level. In my analysis, the bear momentum just get started and we shall look at a scenario where price might drop past the 0.62 mark representing the 100% Fibonacci level to even the 161.8 Extension level. This usually happens if price reverse from the 38.2 Level. Our immediate concern however will be the break below the support at 50% Fibonacci level-at 0.695, which has been our long turn support and resistance.
Today, we maintain our shorts and look to sell as follows:
Sell Limit: 0.7225-Falling at the 61.8 Fibonacci level drawn from yesterday Hi-Lo
SL: 0.7275 with trailing stops
TP: 0.62 (100 Fibonacci level from Yearly Hi-Lo)
Have a good trading day and a nice weekend ahead.