• Bank rate can be cut when there is sufficient evidence of a downward path in inflation persistence
• Focusing just on the next BOE meeting is a little ill advised
• We must focus on the underlying components of inflation
• But also on the persistent components, not just the headline rate

The comments are pretty much a follow up to the ones we saw from Bailey yesterday. It’s been a pretty boring session for sterling, even with the beats in the UK GDP data earlier. Cable is flat at 1.2525 on the day currently.

This article was written by Justin Low at www.forexlive.com.

• That is if additional evidence received by then confirmed the medium-term inflation outlook embedded in the March projections
• A few members felt sufficiently confident that the three elements of the reaction function gave grounds for a reduction in the policy rates already at the present meeting
• The risk of undershooting the inflation target and eventually having to pay too high a price in terms of declining activity was now seen as being at least as high as the risk of acting too early and overshooting the target
• Broad consensus to wait until the next monetary policy meeting to see further evidence of, and gain sufficient confidence in, a timely and sustained return of inflation to target
• Members stressed the value of waiting until June for further evidence confirming, or indicating a change to, the outlook
• Members stressed that maintaining a data-dependent approach with full optionality at every meeting was warranted
• Data dependence meant not overly focusing on one data point, as the path many indicators took was likely to be bumpy
• Members felt that markets had understood the ECB’s communication and reaction function and were prepared for the possibility of a rate cut at the June meeting
• Full accounts

The most important takeaway from all this is the final bullet point. That being the ECB is prepared for a June rate cut and that they are comfortable with the idea that markets are also prepared for that. ‚Nuff said.

This article was written by Justin Low at www.forexlive.com.

If you think that experienced
traders don’t make mistakes, think again. I remember Stanley Druckenmiller, one
of the best (if not the best) global macro traders in history talking about how
he lost billions when he went long the tech stocks in 2000 missing the top of
the bubble by an hour or so.

Even though he
knew he shouldn’t have done that and told himself many times to refrain from
buying, he eventually fell into the emotional trap of the fear of missing out
(FOMO). He didn’t learn anything from that mistake, it was just a normal human
impulse. The reality is that such emotion driven mistakes do happen and no one
is exempt from them.

Another common
mistake experienced traders fall into is market timing. Timing well the market
consistently is basically impossible. The market is a big chaotic thing that, especially
in the short term, can be noisy and very volatile.

Jim Rogers, another
famous global macro trader who co-founded with George Soros the Quantum Fund,
is not shy to admit that he’s very bad at timing the market and although his
fundamental views often proved right, timing is what made him lose money.

He once went all-in short six stocks that he had the most conviction in. Two months later he was
completely wiped out. Was he wrong? Not at all, because 2 years later all those
six companies went bankrupt. Unfortunately in trading, being right but being early eventually
ends up in being wrong.

Mistakes will be
part of your trading career no matter how good you are or how much knowledge and
experience you have. What will make the difference is how fast you will
recognize your mistakes and how well you will manage them.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• I still have that belief that we can lower rates this year
• We’re hearing from pretty much everyone that pricing power is pretty much at its limit
• That should help with further progress on the inflation front
• We are still seeing robust job growth
• It may take a while for labour market conditions to ebb further
• Still sees a single 25 bps rate cut as being likely for this year
• Thinking less of the extent of rate cuts but more on getting the timing right to start the cycle

It’s still about the timing at the moment with markets favouring a September move. I’d take his comment on there being one rate cut only with a pinch of salt. If the Fed gets going in at any point besides December, we could easily see them go for another as long as the same conditions hold.

This article was written by Justin Low at www.forexlive.com.

The USD weakened across the
board yesterday following a notable miss in the US
initial claims data as that added some more pressure on the USD with the
market weighing the possibility that the labour market could weaken fast enough
in the next months to justify more rate cuts than expected. Overall though, the
price action has been rangebound this week as the lack of key catalysts and the
waiting for the US CPI report kept the market at bay.

The CAD, on the
other hand, has been under pressure in the first part of the week maybe due to
the sustained weakness in crude oil prices and expectations building for the BoC
to cut rates in June, although the employment data today and the Canadian CPI
report on May 21st will likely decide if the BoC will wait until July or
proceed with a cut already in June.

USDCAD
Technical Analysis – Daily Timeframe

On the daily
chart, we can see that USDCAD bounced from the key support
zone around the 1.36 handle where we can also find the confluence
with the trendline
and the 61.8% Fibonacci
retracement level. A break below that support should see the sellers
gaining more conviction and increasing the bearish momentum into new lows. The
buyers, on the other hand, keep on stepping in around these levels to position
for a rally back into the cycle highs around the 1.39 handle.

USDCAD
Technical Analysis – 1 hour Timeframe

On the 1 hour chart,
we can see that the upward trendline got breached recently with the sellers
piling in to extend the drop into the 1.36 support. From a risk management
perspective, the sellers will have a better risk to reward setup around the
downward trendline where they will also find the confluence of the 38.2% Fibonacci
retracement level and the 1.37 handle.

The buyers, on the
other hand, will want to see the price breaking higher to invalidate the
bearish setup and position for a rally into the 1.3785 level. The red lines
marked on the chart define the average
daily range of the pair, which is generally the maximum movement we can get
on any given day barring major surprises in the market.

Upcoming
Catalysts

Today we conclude the week with the Canadian labour market
report and the US University of Michigan consumer sentiment survey. Weak
figures across the board for the Canadian jobs data should raise the probabilities
for a rate cut in June, although there’s not much more to price in. In fact, the
next big event to watch will be the US CPI next Wednesday as that will likely
have a much bigger and lasting impact on the pair.

This article was written by Giuseppe Dellamotta at www.forexlive.com.