Wednesday September 4, 2019 - 10:48:02 GMT
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Forex Intervention -- Did the BOE Intervene in GBPUSD
If I was in the Bank of England’s shoes I would have been in the market buying sterling on Tuesday after the pound dipped below 1.20.
While there have been no reports of covert intervention logic says such action would make sense. The reason is twofold:
1) The value of the pound is being viewed as a barometer of Brexit sentiment. In the current environment a weaker GBPUSD fuels negative sentiment.
2) GBPUSD 1.20 is both a key pivotal and psychological level. Major levels loom below 1.20 at 1.1839 the “official” October 2016 flash crash low (it actually touched 1.1491 on that day). Should below 1.20 be established, the flash crash lows (official and unofficial) would become targets.
Given the Brexit uncertainty I doubt the Bank of England would try to reverse the sterling trend but rather prevent another flash crash by lending no support below 1.20.
This would not be the first central bank to quietly intervene to smooth a move or defend a pivotal level. I call this covert or stealth intervention, which is explained in full in my exclusive article.
Forex Intervention Primer - Does it Work?
I suggest giving it a good read to be prepared as President Trump has threatened to intervene in the forex market to weaken the dollar.
Meanwhile, I would not be surprised to learn the Bank of England covertly intervened by buying GBPUSD below 1.20. In fact, I would be surprised if the central bank did not intervene below this level.
Founder. Global Traders Association
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