<<Yes David as you know I like looking at the internals for a "better" look. I indicated in the earlier SSI reading of a cable fall, however at the time there was a slight bump in shorts. Either way Cable losses came a plenty today.>>

Euchre

Anyone old enough?... Interesting commentary below from dailyfx+

07:43 GBP/USD: Racks Up Early Europe Gains, "Shadow" MPC Call for Cut London, December 3. The pound rallied from the European open, with cable soaring to an intra-day peak of 2.0636. Today"s Asian session range was 2.0546-2.0583. Friday"s early NY session top was 2.0684. Friday"s high was 2.0700.
Pre-month end corporate selling, plus leveraged fund sales, helped depress cable to a one-week low of 2.0533 on Friday. 2.0517 was the November 23 floor.
Five of the nine "Shadow" MPC members recommend a UK base rate cut this week (Thursday), with three of those doves advocating a 50bp reduction. One of the doves has even called for a 75bp cut (Sunday Times). Balance of risk tilts slightly towards a fifth consecutive "unchanged" verdict.
ONS data sourced to the BoE shows the volume of market loans in the banking system plunged from GBP 640bn at the onset of the credit crunch in August to GBP 249bn by the end of September (Daily Telegraph, B1).

Interesting. Though I question their influence. King seems to be a very proactive policy leader and the MPC often acts with little forewarning, but I'm always going to err on the side of caution and prepare for no change. The guy calling for 75 bp of easing is clearly trying to look good for his constituents (or has a liberal arts degree).

That being said, there seems to be sufficient data for the policy group to start discussing a cut. The weak housing data, flippant consumer spending data, the topping money supply data and oppressive lending and exchange rates all seem more than enough reason for this quick to act central bank to shake up the market.

Good statistic on the lending data.

No idea what this has to do with anything. Keep on subject or prepare to be moderated, Kicklighter.

The upswing in GBPUSD has been pretty impressive. In looking at the short-term for quick trades I hadn't looked at my daily and weekly charts in the past few days and I failed to see support around 2.0500/25. That was a fairly good bounce which jives with the medium and long-term uptrend and (in retrospect) would have been good for a hefty trade after the lower frequency chart lined up.

From here it looks like we are setting up a heads and shoulder formation. We just tested the neckline at 2.0525; and as long as this rally doesn't go above 2.0750, I would say it looks like a good -&S setup. That could be a good setup for a huge GBPUSD break since technically we have the rising trend from August's lows just coming up on 2.05. For a fundamental trigger: a surprise rate cut? I see little downside to setting a short stop order below 2.05 and watch it during the BoE's rate decision to make sure it isn't just a whip in and whip out.

Any one preparing for the opposite and see new GBPUSD highs above 2.12?

Attached Images

 

GBPUSD - The ratio of long to short positions in the GBPUSD stands at -1.25 as nearly 56% of traders are short. Yesterday, the ratio was at -1.15 as 54% of open positions were short. In detail, long positions are 3.3% higher than yesterday and 76.2% stronger since last week. Short positions are 12.3% higher than yesterday and 29.2% weaker since last week. Open interest is 8.1% stronger than yesterday and 7.2% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.


Source: FXCM Execution Desk

For historical data and the latest charts based on the SSI please visit http://www.dailyfx.com/story/strateg...353412325.html

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The sudden jump in GBPUSD short positions is certainly giving me reason to ease off of my bearish stance, but price action promises to clarify quite a bit in the days ahead on critical US and UK economic event risk.

David, bec. this Shadow MPC talk is right in target with what we discuss in this forum Cable/$ related issues. We are more on track here then the rhetoric spewed in Euro/$ land where opinions on fundies, US$ , trade, etc are as useful as trying to speculate on currency positions based on fundamental data.


Euchre

Just realized that you can't see italics in quoted blocks of text because it's all italicized by default. I was referring to his comments on Liberal Arts degrees, and I will leave it at that.

Sometimes David gets a little cranky...

Cable uptrend remains intact for now, however, I suspect Thursday's BOE decision could have bearish repercussions for the pair. I don't think they will go so far as enacting a rate cut (though it wouldn't surprise me, as UK markets and policy makers seem pretty spooked by the credit crunch), but they could issue a statement like they did in early Sept when they first addressed the August volatility. For those who aren't obsessed with central banks (like me) and don't know, the BOE does not typically issue policy statements unless they make an adjustment to monetary policy (rate hike/cut).

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<<Side note - Thanks Terry, probably needs more fiber in diet >>

Comparison from Monday and Today

//monday

SSI: EUR/USD Positioning is Close to Parity

Monday, 03 December 2007 18:17:46 GMT
Written by Antonio Sousa, Quantitative Strategies Analyst


GBPUSD - The ratio of long to short positions in the GBPUSD stands at -1.25 as nearly 56% of traders are short. Yesterday, the ratio was at -1.15 as 54% of open positions were short. In detail, long positions are 3.3% higher than yesterday and 76.2% stronger since last week. Short positions are 12.3% higher than yesterday and 29.2% weaker since last week. Open interest is 8.1% stronger than yesterday and 7.2% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.

<< Longs getting longer 76% bump. Shorts growing S/T but not bldg positions up 21% down 29% Bias mixed.>>


//tuesday


SSI: Sterling Short Positions Jump 20.6% From Yesterday

Tuesday, 04 December 2007 09:23:46 GMT
Written by Terri Belkas, Currency Analyst


GBPUSD - The ratio of long to short positions in the GBPUSD stands at -1.26 as nearly 56% of traders are short. Yesterday, the ratio was at -1.15 as 54% of open positions were short. In detail, long positions are 10.0% higher than yesterday and 87.6% stronger since last week. Short positions are 20.6% higher than yesterday and 24.0% weaker since last week. Open interest is 15.7% stronger than yesterday and 14.3% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.

<< Longs up 10% continuing to feel that buying pb's is the way to go and went from 76 % yesterday to 88% today on growing longs = bearish cable. Shorts from+12 to +20%, but again short term, down 24% since last week. Reading this also mixed however the compelling # I see isthe growing long positioning up 88% while shorts are only speculating S/T. >>

With event risk looming SSI, is this less reliable??

Euchre

Disclaimer Trading Currencies involves risk. Any opinion, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice.

Worst case scenario BoE do not cut and Fed cut 50bp. Would blow a big hole in my short methinks. Is it time to cut and run? Still working on an average of 2.0550 so I am not too much out of pocket. Just looking back to July time when we were at this level and fell back to 1.96. At the time I had exited my shorts and missed most of the action. I could put some stops in but normally when I do this I get taken out almost immediately. I also keep remembering that December is normally bad for the $.

I think if we hit 2.0550 again I will reduce my position and stick in an order lower down in case the momentum continues.

Well I won't deny that I get cranky every once and again, but that's a little odd.

That's a really good question. I would argue that it probably is going to be less reliable just because there are greater forces at play in the market. If we can split price movements into "flows-based" and "news-based" (gross oversimplification, I know), then it should be relatively clear that the importance of flows-based moves will decreased as news activity picks up.

This is an interesting perspective from Joel Kruger over at Thompson's IFR Markets:

Does the BoC rate cut suggest that more and more central banks are likely to follow suit? It's certainly possible. Of course the Canadian economy faces completely different headwinds than the UK economy, but they each have seen CPI ease to reach levels at-or-below official targets through recent months. Also, the recent duress in interbank rates really underlines the fact that current monetary conditions are a good deal tighter than the 5.75 percent BoE rate would suggest. I'm casting my vote for a BoE rate cut.

<< This actually would play out potentially to be $ bullish as the FOMC would be seen as a head of the curve while the BoE would be stubbornly behind.
Global loosening of monetary policy lessens inflation , the $ rises lower oil and gold. A win win ??

Now if only LIBOR would come back down to earth bec. that high rate is still putting a serious kink in the credit markets.

I am looking forward to JCT's post conference press briefing and how many times he'll utter:

price stability
we don't not pre-suppose
I already answered that
mad'am thanks for your question
will he say "strong vigilance" he wasn't last time and the euro continued to rally.

the end of the week sure looks to be looking like major fireworks. Keep powder dry, keep bullets in gun and don't try to hard in this market bec. you start forcing trades earlier here that have no conviction and your losses and frustrations keep you from pulling the trigger when the solid signals come after all the event driven news, fwiw.

Euchre

Disclaimer Trading Currencies involves risk. Any opinion, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice.