Here we are around midday waiting for the US traders to enter the market. It´s been an interesting day with a lot of price action, unlike yesterday.

Today kicked off with the USD taking a beating early on in the morning, worth 100 pips. I heard rumors that the market is getting increasingly wary of Trump´s ability to govern properly. If that´s the case and if Trump continues like this, then the USD will be in danger.

The highlight of the European session was the UK inflation report. Inflation remained flat in June and the yearly numbers moved lower; CPI (consumer price index) fell to 2.6% and the core CPI fell to 2.4%.

It´s a bit relaxing that the trend retreated a little, thus easing worries about hyperinflation. Nevertheless, these levels are above the BOE (Bank of England) target, so after the initial 100 pips tumble, GBP/USD is having second thoughts at the 1.30 support level.

Daily Highlights

The spotlight will be on the GBP again during the US session. BOE Chairman Carney will up in a couple of hours introducing the £10 and he´s likely to talk about monetary policy as well.

After hearing a few hawkish comments in his last speech, it will be interesting to see what he has to say now that inflation has retreated a bit. Will he turn dovish, sending the GBP tumbling below 1.30 or will he keep the same pathos as the last speech?    

The GDT (global dairy trade) price index will be released at any time, which will have an impact on the Kiwi (NZD/USD), so we must keep an eye on that release as well.  

GBP/USD – Remaining In The Spotlight

GBP/USD had a go at the top side this morning, briefly piercing yesterday´s high before returning back down. Then the inflation report hit the market and this forex pair dived around 100 pips lower.

But, the 1.30 level is still holding strong. We had mentioned that you could give this level a go with a short term forex trade, targeting 20-25 pips. Well, we dived to 1.3005 a few minutes ago and are headed back higher now, so if you took a trade down there, you must be in profit by now.

I would suggest that you lock the stop loss at break even, just in case, because volatility might increase as US trades wake up and Carney´s speech approaches.   

Is 1.30 going to survive today?

Trade Ideas

We don’t know what Carney is going to say about the monetary policy or how he sees this morning´s inflation figures, so it´s safer to stay on the sidelines until we hear some of his comments.

• If Mark Carney falls back to his usual dovish rhetoric and puts more importance on the weakening UK economy rather than on inflation, the Pound is going to dive hard. If, on the other hand, his main concern is inflation, then GBP is likely to rally. However, I think that buying EUR/GBP on a decent retrace lower would offer a good risk/reward ratio
• Also, I´m also looking to sell NZD if the dairy trade prices fall, particularly NZD/USD, after seeing this forex pair having trouble breaking above the 0.7360-70 resistance level.