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Daily Archives: April 27th, 2016

The story of Brexit has dominated the GBP pretty much the entire month of April.

It started at about 1.4272 on April 1st, hit a low of 1.4019 on April 6th and 7th and from there it established four highs topping at 1.4632 on April 26th.

1H + Fibo suggest that spot is trading at the 100% level

4H + Fibo suggets that spot is trading at 50% level

Any negative surprise to the GDP data will surely see GBP crashing! Wall Street is expecting a range between 0.4% to 0.5% with general consensus at 0.4%.

Let’s see.  Let’s all be there to capture any potential opportunity if it presents itself.

We did well this morning with the AUD CPI, will out positive momentum continue this afternoon in the UK trading session?!

This morning 9:30am Singapore time was the Aussie CPI quarterly numbers.  This time around, the CPI is important to support what is going on in the economy; rising real estate prices, rising food prices, rising wages.  Forecasters was expecting 0.3% for the quarter.

I decided to place my straddle trade at 9:27am with the following details: –

AUDUSD   –   Stop if Offered; 0.7728, Spot at 0.7758, Stop if Bid; 0.7788 with corresponding SLs at 30bps away

As it turned out the CPI came in NEGATIVE at (0.2)%, it surprised me too!

Immediately the AUD tanked, triggering my Stop if Offered at 0.7728, the initial drop was 88bps down to 0.7670, then, it began to pick up more momentum.  At about 1:42pm the spot level was at 0.7633 and I decided to square the position to lock in my trading profits of 95bps.

It’s 2:40pm Singapore time now, and the spot is at 0.7614.

So the total move from the spot at 0.7758 to now is 144bps!  So you see, a significant data event and one that financial markets has been talking up to create volatility coming into the data, usually will react violently if the data was significantly different from expectations.

This afternoon is UK quarterly GDP, are we going to see any surprises.  Lately, economic data coming out of the UK has been dismal except for the continuing rise in real estate prices.

The 4H + Fibo indicates that the current spot level is at the 50% level.

The 1H + Fibo indicates that the currenct spot level is at the 100% level.

So it looks like any negative surprise to the GDP data could easily cause the GBP to tank?!

Let’s all the be there later.

Ok, it looks like my call was wrong.

Profited from the GBP because the put level was on the higher range.  In hindsight, the levels of the AUD, EUR and JPY were all kind of the mid range between the high and low goal posts.

Today’s Australia CPI was negative, indicating that the Aussie economy has gone into deflation the past quarter. This was good for my spot trade which I will share in another write up and makes my put option look alittle better but honestly, the I doubt the AUD level will be hit before the end of this month, only two more days.

Looks like I may be throwing away the options paid for the AUD, JPY and the EUR, then again, if I did a mark to market, then, I lost less doing the options then continuing the hold say an ‘open’ spot position, which would have necessitated a top up by now.

So, as I have always shared with all of you, if you have a fundamental view of a strategic view, then, play the potential opportunity by way of an option, rather than doing a spot transaction.