A1 Trading Company

June 22, 2023

How We're Trading UK's Surprise Rate Hike

Frank Cabibi

This morning's BoE decision took investors by surprise when rates changed by more than expected. News of the aggressive hike caused a stir in the pound pairs as the UK's dealing with sticky price inflation. The BoE delivered a statement that brought the GBP bulls back.

EdgeFinder Analysis

EURCAD is the strongest sell on the EdgeFinder at -5. The CAD takes EUR on all fronts except COT data, which is nearly the complete opposite from the smart money side. Although retail stays long, price has declined over 4.5% since the highs of May.

Smart money does favor the euro over the loonie right now, but weekly activity may be suggesting yet another shift in COT sentiment. Even though these moves take a long time to fulfill, it's important to spot the trend early.

GBPNZD has come down to some support on the 4H around a rising trend line. If price can hold at this level, the pair may likely take another shot at resistance around 2.07168. Additional support lies below current price at the previous bounce off the line under 2.04. We could also watch for a break at the double top for a continuation of the uptrend.

GBP and NZD make a great pair due to the opposing stances of their central banks. The RBNZ does not want to keep hiking rates as it sits at 5.5%. Meanwhile, the struggling UK needs to keep interest rates higher to battle sticky inflation.

GBPJPY could be the most promising of the pound pairs as these two central banks are starch opposites. Governor Bailey of the BoE remained incredibly hawkish towards monetary policy, stating that they must get stubborn prices down before they even think about pausing.

On the historical backtest feature, we can see a potential shift in EdgeFinder sentiment from what used to be strong sell readings. Now the scanner has a different bias, and the yen is currently the least desired currency. After the BoE meeting, it appears likely that the pound will become more in demand.

Retail Sentiment

Retail positioning tells us all what we need to know. The crowd is mostly anti-GBP while favoring JPY. Retail could be looking for a reversal play on any one of these yen pairs that are shooting higher and higher. If we were to take a look at the smart money chart, things will likely be different.

Smart Money Tracker

Something that you won't see from the retail side is a favored pound and neglected yen. You would need to scroll to see the yen at the bottom of the table. The bottom chart shows the smart money bias based on net positions to the long side.

Fundamental Spotlight

If we were to look at the latest seasonality data, however, it might give the bulls a second opinion. June's historical performance is not bullish on the 5 and 10 year averages. Actually, the next three months do not look bullish for the pair, according to historical performance.

A1 Edgefinder

AI- Generated Trading Setups
AI-generated bullish/bearish bias setups on forex currencies, gold, & indices.

Discount code: 'READER'

Access Now


Trading Plan Template
Struggling to build a successful trading plan? Download our template to get started today!
Yields Hold Steady After GDP

GDP numbers came in lower than expected in the US, marking the third straight drop in economic output. This is usually good news for the stock market indices and gold, however, bond yields continue to hold up above 5.1%. Here are some potential trade setups for both dollar and index longs depending on how the […]

Read More
USOil Breaks Through the Highs! (+$2646.85)

Hi, I’m Nick! I am the founder of A1 Trading, market analyst, YouTuber, and creator of the EdgeFinder software tool. I caught a huge winner on USoil with the help of the EdgeFinder! In this article, I’ll walk you through my thought process behind the trade and how I found this crazy runner! Finding My […]

Read More
Surprising Risk-Off Signal From the EdgeFinder

Last Friday's report showed a significant change in global market sentiment from smart money. What COT signaled has turned ultra-risk-off for traders who have been hoping for Fed fears to subside. This news could spark up worries about higher interest rates for the long term. EdgeFinder Analysis GBPUSD is now a -12 on the EdgeFinder […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
homesmartphonelaptop-phonemenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram