There’s panic in FX and major currencies like the GBP are reacting in a troubling manner. Seems to be a disconnect between FX and bonds versus stocks, which are still grasping on to supports, even as panic is getting priced-in to FX and bond markets.
from March of 2020 around the 1.1414 level. The pair has completely unraveled since then, with sellers making a mark by pushing prices more than 1,000 pips off of that prior spot.
Today’s daily bar constitutes more than 5% of the GBP/USD quote and there’s a 535 pip daily range, as of this writing. The underside wick combined with the reaction at the prior all-time-low just above the 1.0500 handle is normally something that I’d be investigating reversal strategies around, especially if it’s matched with some type of change or adaptation from the central bank.
And it looked like there might be the makings of such this morning. And then the Bank of England put out a statement that was essentially a non-statement, avoiding commitment to anything other than their next rate decision that’s almost two months away. And GBP/USD went right back in the tank, and now there’s a chorus of calls for a parity print in GBP/USD.
So, from a directional perspective this seems to be a pretty tough time to line up a trend. The big question is if recovery can play-in or whether we see further collapse-like price action similar to what showed at the open last night. But, even then I’m somewhat cautious given timing. 8PM ET, when the break really started to show, is 1 AM in London, when liquidity is generally pretty low. This, to me, sounds like someone is trying to be George Soros 2.0.
For bearish moves, a push below 1.0600 darkens the sky but its breaking back below 1.0500 that’ll re-open the door for a run at the lows around 1.0350.
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