As we expected in our July 12 Article, ".. This potentially form the next swing low on the daily, if there are not enough sellers who are willing to continuously sell at current rate, around $1.5450..." has come to light, thanks to the heavyweight UK GDP that was released at 0.7% as expected last week which help keep the buying momentum.
Thursday, the very much awaited BoE's MPC Meeting on interest rate will dictate whether the next psychological level, 1.55 will be defended. It will be an interesting meeting, since this is the first time BoE's Monetary Policy Committee will release a rate statement together with inflation report. Market expects two of the voting member to favor a hike while the remaining seven unchanged, hence we potentially see heavy buying on dips prior to the meeting.
Alternatively, if all 9 votes remained unchanged, we might see 1.5450 being retested as a potential bear flag is evident on the daily. Furthermore, both UK constructions and services PMI has missed estimates hence weakened market confidence and make a bear case more probable.
On the dollar side, Feds Atlanta's Lockhart fueled dollar bulls yesterday and pressed dollar Index to test last month high around 98.30s, but ADP employment change that missed estimates and below 200K put a rein on the bulls. Either way, up or down, this Friday's NFP could be a game changer for the dollar.
On the institutional side, Morgan Stanley (NYSE:MS) was seen to quit its long and switched to the bear camp in the interim. Halal Traders remains bullish with closed below 1.5450 stop, targeting 1.61 in 3 months. We are buying on dips with caution and long dollar/yen as a hedge.