- Different Types Of Forward Guidance - July 11, 2020
- Quick Tip On Looking For Entry Locations In Equities - July 11, 2020
- Another Example Of Why Expectations Are So Important - July 10, 2020
We’re going to demonstrate how Financial Source subscribers made money trading a sentiment shift involving the dovish turn by the BoE this week…
The move we’re going to be looking at is the GBPAUD Pair. So, let’s break this down and see how you could have predicted and caught this move, using our market commentary.
So, firstly we need to understand the context or the baseline surrounding this pair before the move took place…
Now inside the Financial Source Terminal on the 17th January, we released our Dominant Currency Sentiment report for the session as well as the current sentiment drivers for each major currency. And in these reports, we saw that the current short-term baseline for the AUD was to the upside given some good Chinese economic data which was released a bit earlier in the session which caused an overall RISK-ON sentiment in the markets.
Furthermore, we had a lot of focus on the GBP, and especially important economic data out of the UK due to the increase in dovish rhetoric from the BoE and the market’s increased expectations of a possible rate cut by the BoE later in the month.
So, based on this we knew that the AUD was being driven higher on the day by the risk tone and we also knew that any big negative deviations in important UK economic data would increase rate cut probabilities and should see weakness across the board in the Pound.
Once the baseline was in place the next step is to identify the type of breaking news that would generate the biggest market moving shift…
Now also in the terminal we released two videos on the 17th, the first one highlighted that there was some upside seen in the Pound prior to the Retail Sales numbers but that there was no catalyst for the move to the upside, this video also explained that given the current risk tone at that time it would be a good opportunity to sell the GBPAUD if there was a substantial miss in UK Retail Sales data.
So now all we needed next was the trigger, in other words, the sentiment shift that we identified ahead of time, to actually take place.
So, also in the terminal, later on the 17th we had the release of UK Retail Sales which showed a significant miss in the numbers and saw an immediate negative reaction in the GBP across the board. There was an immediate reaction to the downside of about 40 pips, now after this announcement, even if you missed the initial move, you had about 5 minutes to digest this information, realize that it was a tradable sentiment shift, and then pull the trigger on the trade.
Even if you waited 5 minutes and took off the trade at the next psychological price level you still could have banked 50 pips on that move to the downside.
So, if you’re interested in learning more about how our market commentary can help you interpret news and fundamental analysis into profitable trades like this. Click the menu above and check out Financial Source.
Thank you and please post your questions or comments below this video because we read them all and actually base our future videos on what you ask for.