Forex Analysis (Wed March 23 2011, 5:30am NY Time EST) - UK MPC Meeting Minutes

[Henry Liu]

MPC Meeting Minutes is scheduled to be released today and since it is customary for BOE (Bank of England) not to release a statement along with its interest rate decision (2 weeks ago) if there were no changes in either rate decision or APF (Asset Purchasing Facility, UK’s quantitative easing program), today will be the first time for a glimpse into what took place during this meeting, here is the forecast:

5:30am NY Time UK MPC Minutes Forecast 3-0-6 Previous 3-0-6
ACTION: GBP/USD BUY (4 Vote For Hike) / SELL (2 Vote For QE)

The Trade Plan
We will be looking at the vote count today. If we get 4 votes for hiking 25 basis points, we should see some strengthening in the Sterling and a BUY GBP/USD trade should be justified. If we get 2 votes for quantitative easing, or to increase the current APF from 200 Billion Pound, GBP should weaken and a SELL GBP/USD trade should be justified.

Due to the nature of this release, you need to have a newswire or audio service in order to trade it. We should see a steady market reaction after the release and possible carry over to the NY Session.

I'll be looking for an after news retracement trade. For more information, please read:
Henry's News Trading Methods.

The Market
Once again, MPC or Monetary Policy Committee, from Bank of England (BOE) will be releasing their meeting minutes on the Rate Decision meeting along with the actual vote count over the rate decision and the Asset Purchasing Facility program. If you recall, MPC once again left both intereste rate and APF unchanged two weeks ago, and when there were no changes to monetary policy, BOE usually do not issue any statements until 2 weeks later during the MPC Minutes.

With the yearly CPI figure at 4.4% level, market speculation for further quantitative easing has pretty much diminished, as many traders are now speculating that aside from Sentence,Weale, and now Dale there may be one more members inclined for a sooner than later rate hike... At the very least, if we do get a strong concern out of this minutes over inflation, market will definitely be looking to BUY Sterling as a result.

Additional Thoughts
It is my opinion that GBP is well supported and UK CPI will remain under strong pressure... That means I will be looking for LONG trades on Sterling crosses only.


Pre-news Consideration
We could see pre-buying of GBP, therefore I'd be looking to go long on GBPUSD if market drops to around the 1.6300 level.

Here is the historical data & chart for UK MPC Meeting Minutes

Thanks,

 

[qwerty63]

I wonder what happened at 9.02GMT that caused cable to spike down. Same spike but little stronger was at 9.30GMT after release of meeting minutes. Maybe people expected 4-0-5 and no change caused this reaction. But this at 9.02GMT is mystery for me. Anyone can try to explain?

 

[Boko Maru]

I wonder what happened at 9.02GMT that caused cable to spike down. Same spike but little stronger was at 9.30GMT after release of meeting minutes. Maybe people expected 4-0-5 and no change caused this reaction. But this at 9.02GMT is mystery for me. Anyone can try to explain?

There are all kinds of possible reasons; what the specific reason was for that specific move is only speculation. It might have been a leak, a large sell stop order being hit, market manipulation by the banks (i.e. running a large block of sell stops at that level), a big corporation needing to sell GBP, etc. Point is many things can result in significant price movement other than just news releases.

Best approach is to "trade what you see", meaning trade according to the price action and according to what the chart is telling you, rather than trying to figure out what is behind every move. Because in the end it doesn't really matter; we're traders, not economists. Lots of people trade profitably and pay zero attention to news; they just trade the chart.

I do trade news myself, but just sharing some comments for what it's worth...

 

[Maluco]

Agree with the above comment.

There are reasons beyond our knowledge, but I reckon it was stops getting triggered related to a huge profit taking by major institutions.

As for trading news, I recently develop my own method that I won't even post it here, as it might sound crazy for many, but it's working brilliantly.

A tip for you: Do a backtesting and see the price movement when the numbers are released on NFP for instance. See on a 15m bar the path that price has tracked.. does it look similar every month?

I trade NFP on a different method to the others news.

 

[qwerty63]

Thanks for your comment.
I was wondering, just because I had waiting order and at that time it was triggered, but I was not very happy that spread went to 8 pips from normal 1-2p. It was like during some news, so I'm curious if someone knows something I don't know, that probably happened at 9.02GMT
Good thing (for me) was, that I have made pips/money on today's move.

 

[qwerty63]

@Maluco: Like many of us, sometimes I'm doing some research looking for patterns, how the price behaves after release.I have not came up to something enough valuable yet... I know the 'system' in which you should wait for a 15min candle to close after news release and then trade breakout from this candle with trailing stop 30 or 40p. Sometimes it works good, sometimes not quite... But maybe 60/40 can be achieved.

 

[Boko Maru]

Thanks for your comment.
I was wondering, just because I had waiting order and at that time it was triggered, but I was not very happy that spread went to 8 pips from normal 1-2p. It was like during some news, so I'm curious if someone knows something I don't know, that probably happened at 9.02GMT
Good thing (for me) was, that I have made pips/money on today's move.

I'm not aware of anything specific that happened at 9:02, but possible something happened I don't know about.

The spread you saw could of course be related to your broker, but assuming it was actual "interbank" pricing, then it might have just been a period of volatility for whatever reason. Last week when everything was happening in Japan, spreads on yen pairs were enormous. My guess on GU is that a big order was either triggered or just was entered into the market unexpectedly, and it quickly cleared out all the bids available at that time. Until price action "normalized", spreads may have been a bit wide as a result.