GBP/USD Long At 1.3200

EUR/USD: Falling Likelihood Of Fed Hike Next Week

• The U.S. Commerce Department said retail sales declined 0.3% after edging up 0.1% in July. Sales were up 1.9% from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1% last month after a similar drop in July. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. The market had forecast overall retail sales slipping 0.1% and core sales climbing 0.3% last month.

• In a second report, the Fed said manufacturing output fell 0.4% in August, reversing July's increase. Output was hurt by declines in the production of nondurable goods. While many durable goods industries posted declines of nearly 1% or more, motor vehicle assembly increased.

• Manufacturing is grappling with the lingering effects of a strong dollar and lower oil prices. Activity in the sector has also been undercut by an inventory correction. Regional surveys also suggested factories remained on the back foot in September.

• In the wake of the dour reports, the Atlanta Fed lowered its third-quarter GDP estimate by three-tenths of a percentage point to a 3.0% annual rate. The economy grew at a 1.1% rate in the second quarter.

• The Fed will hold its policy meeting next Tuesday and Wednesday. Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before hiking rates.

• Financial markets are pricing in a roughly 12% probability of a rate hike next week, down from 15% before the data. September rate hike probabilities have been declining since early this month in the wake of a slowdown in job growth in August.

• U.S. CPI reading is scheduled for today. We expect an increase in inflation rate to 1.0% yoy in August from 0.8% yoy in July.

• We stay EUR/USD long for 1.1390 in the short-term part of our portfolio. No Fed hike next week should support the EUR/USD.

 

GBP/USD: BoE Sticks To Its Plan To Ease Further

• The Bank of England said it was still likely to cut interest rates to just above zero later this year, even though the initial Brexit hit to Britain's economy was proving less severe than it had predicted only last month.

• The BoE's rate-setters voted unanimously to keep Bank Rate at 0.25%, after cutting it in August for the first time since 2009 to tackle the shock of Britain's vote to leave the European Union.

• Policymakers also voted 9-0 to keep their government bond-buying target at August's new, higher level of GBP 435 billion and to stick with a new plan to buy up to GBP 10 billion worth of corporate debt.

• August's stimulus was Britain's largest since the global financial crisis. But since then a string of indicators have rebounded from July's slump, leading some lawmakers to chide BoE Governor Mark Carney for being alarmist about the Brexit vote.

• Central bank staff estimated the economy will grow by 0.3% in the July-September period, better than their previous forecast in August of a slowdown to 0.1%. The Bank also said inflation would rise more slowly this year than it previously thought.

• "The Committee's view of the contours of the economic outlook following the EU referendum had not changed," the minutes said. If the November forecasts were "broadly consistent" with August's, "a majority of members expected to support a further cut in Bank Rate to its effective lower bound at one of the MPC's forthcoming meetings during the course of the year," they said, reiterating the message of August.

• Two BoE rate-setters who last month opposed the expansion of the government bond-buying programme said they still did not think it was needed, but voted in line with their colleagues because reversing the decision now would be too disruptive. Under a new MPC calendar, the Bank's next rate decision is scheduled to take place on November 3. Unlike the European Central Bank and the Bank of Japan which have cut interest rates below zero, BoE Governor Mark Carney has said he does not favour resorting to negative rates in Britain for fear of damaging the country's big banking sector. A rate cut to 0.1% is possible in November, although financial markets might react sensitively to any data in the coming weeks that they think could prompt a BoE rethink.

• Our long-term GBP/USD outlook is bullish. We have got long at current market price (1.3200) in the short-term part of our porfolio.

FOREX - MAJOR PAIRS:

FOREX - MAJOR CROSSES:

PRECIOUS METALS:

It is usually reasonable to divide your portfolio into two parts: the core investment part and the satellite speculative part. The core part is the one you would want to make profit with in the long term thanks to the long-term trend in price changes. Such an approach is a clear investment as you are bound to keep your position opened for a considerable amount of time in order to realize the profit. The speculative part is quite the contrary. You would open a speculative position with short-term gains in your mind and with the awareness that even though potentially more profitable than investments, speculation is also way more risky. In typical circumstances investments should account for 60-90% of your portfolio, the rest being speculative positions. This way, you may enjoy a possibly higher rate of return than in the case of putting all of your money into investment positions and at the same time you may not have to be afraid of severe losses in the short-term.

How to read these tables?

1. Support/Resistance - three closest important support/resistance levels

2. Position/Trading Idea:

BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.

LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size (forex) - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!

Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).

6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.

Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.