An opportunity to gauge the relative strength of a currency
In every (mini) crash, there’s a lesson to take away. GBP happenings past hour: dropped from 1.3070 to 1.2989 in minutes.
What triggered it is less important, fact is we ran into a slew of short term stops, people being long GBP on a better Brexit outlook and this morning’s data and positive risk environment but at the same time leaving close stops as headlines can turn things around very fast.
Whether it were algo’s or trading desks needing to exec stops all over the place will be left in the middle.
What happened this morning can be seen as traumatising, especially if one has an opposite position to the move, sorry of it was the case for any of you.
But these are good moves to gauge the underlying strength/weakness of any currency to look at it from the opportunity side, since that’s what we do and still want out next trade on the books.
It’s probably going to take some time, a few hours, to absorb the stops, calling clients, explain and pick up new orders, but once done, the levels will come back into play and the currency will show its real face again. From now respect the levels again and watch it we’re sliding slowly back down or find support typically around 2/3 to 3/4 of the initial dump or jump.