Illusions: do not cheat but earn

30 Tem 2019

The pound hasn't been consistently lower since 1985. Mr Gove told reporters earlier: a “no-deal Brexit is possible”. Boris Johnson is refusing to sit down for talks with EU leaders until they agree to ditch the Irish backstop from the Brexit withdrawal agreement. Entry-Exit will cast approximately $ 1.2 billion. Well, Europe is satisfied with the current deal version.

Despite that fact that the British pound was sold out on growing fears of a potential ‘no deal’ Brexit, we believe that the parties negotiate better bargain for themselves by voicing extreme positions. That is a big game. And understanding of its rules throws the entire perception of reality into the adequate one, including the British pound future dynamics. In our opinion, what is happening with the pound is a one form of deception, an illusion, a false reality is formed on the market. One of the manifestations of this is the pound current prices and its price dynamics. We believe that it is a significant opportunity for purchasing. The question is if you have got enough patience to wait for profit.

Meantime, we are on track in the punchline of this summer, or of 2019, in the foreign exchange market. The Federal Reserve's Review of Its Monetary Policy Strategy. We already wrote that the current consensus in the market is a cut rate (according to the Chicago Mercantile Exchange 100% of traders believe in).

However, the dollar is in the area of two-year highs. Seems lake on Wednesday they are planning to increase the rates. Do not forget about the GDP (2.1% in the second quarter, 3.1% in the first), impeachment against US President Donald Trump, possible foreign exchange interventions by the US side, etc.

Why is the dollar so expensive? Isn't it time to be discounted under the Fed decision? In the end, cutting rates of the central banks is the strongest bearish signal for the currency. As an example, the Fed cut rates in 2007-08, during that the dollar lost about 15% (!) Of its value.

In our opinion, we are dealing with a classic “divorce”. Markets test traders’ "strength." So, those who pass this test earn.

So our recommendation is: sell the dollar or keep the existing short positions.

So, despite the dollar growth yesterday, our trading recommendations are unchanged: we will continue to sell the dollar, as well as selling oil and the Russian ruble.