It looks like the market is willing to take some risks today as safe haven assets are being dumped while risk assets are surging. The British Pound stands out which is making massive gains for the second day. Cryptocurrencies are stretching their slide again today, but I have an idea …  

GBP is on steroids, but to me this is more of a dead cat bounce

GBP Surges on BOE Comments

Yesterday, the British Pound surged after the Bank of England (BOE) statement which implied that the monetary stimulus would be withdrawn soon. It closed the day at the highs, 200 pips higher and above 1.33.

Today, the BOE member Vileghe said that, “the BOE might have to raise interest rates more than once if the economy develops as expected." I don’t know what the BOE sees in the British economy right now apart from surging inflation, but it's their business.

Our business is to see how they affect the GBP, and they are affecting GBP indeed. Today GBP/USD made another 200 pip rally taking out 1.35 and 1.36 altogether.

There's still plenty of time until their next meeting and with what we have seen so far this year, I don’t think the economic data will support a rate hike. The market does what it wants to do, so GBP/USD is considerably higher.

Although, there is a level which might provide resistance. That’s the low from back in March 2009 at 1.3640-50 where the blue line is standing. That might be a good level to try a short FX trade on this pair, so I’ll keep an eye on it.  

We're approaching previous support at 1.3650.   

Cryptocurrencies Extend Their Tumble. Who Wants to Buy Now?   

As we mentioned in the previous update, cryptocurrencies have been advancing all year taking out everyone who went against them, but in the last couple of weeks we have seen a sharp pullback, particularly in the last few days.

We explained in that update the reasons why this is not the end of the cryptocurrency market, so this should be just another correction, which was long overdue after an amazing year until September.

There was panic yesterday, but the decline has accelerated today, so it seems like the market is getting back to normal. The 20 SMA has been a decent support for the last two years, and we are right above it now, so this might be a good chance to go long on my opinion.

US Retail Sales Miss Again, but Manufacturing Saves the Day For the Buck

The US retail sales report was disappointing again, with retail sales declining by 0.2% and core retail sales missing expectations for a 0.5% increase.

This is not a good report, but we have to take into account the hurricane last month. It surely has had an impact on retail sales, since Texas is one of the biggest US states.

The US lost around 40 pips, but it is claiming those losses back now as the market realises the impact of the hurricane.

Besides that, the Empire State manufacturing index rose to 24.4 against 18.8 expected, which is another reason why the SUD buyers are fighting back. We have an open forex signal in EUR/USD, so we hope the USD gets back on track soon.

Trades in Sight

Bullish Bitcoin

1. The trend has been up since forever
2. The 20 SMA has been solid support
3. The daily chart is oversold

You see, Bitcoin is already $400 higher now.

As we presented in the previous update, the daily chart is oversold with both stochastic and RSI at the bottom of their windows. The weekly chart is not oversold, but it has never been oversold since early last year when stochastic became oversold for a brief moment.

Besides that, the price action today shows that the sellers are having second thoughts, and the buyers are gaining confidence since they are trying to push back higher. So, I might buy today or wait for the daily chart to close. Decision time!     

In Conclusion

The highlight of the day has been the GBP without a doubt. The economy of the UK is very anaemic, but the BOE is feeling confident for the future and that’s what the market needs. Although, I still hold a bearish view for GBP/USD, but I’ll let this pair close the week before making a decision.