Rebirth of the Capital Legend

"Mr. Gu, looking at the trend of the British pound exchange rate, it doesn't look good!"

Noticing the weak trend of the pound exchange rate, the lack of rebound, and the continued sharp decline in net long positions, Xie Hongxing, the trading team manager of the main fund product trading room of Tianhe Capital, also in Hong Kong, frowned and hurriedly reported to Gu Chijiang.

"What's wrong?" Gu Chijiang asked hurriedly.

Xie Hongxing pondered for a moment and responded: "It stands to reason that when the market news is biased towards the bullish direction, the market trend should be positive, but the current market trend is inconsistent with our expectations. In addition, after the pound exchange rate has fallen sharply and retreated fiercely to the support point near 1.5200 points.

According to normal logic, this position should be a manifestation of intraday profit-taking by short sellers covering their positions and long sellers continuing to increase their positions.

But at present, the short positions in the market are still increasing sharply, while the long positions are still decreasing sharply.

This shows that the short capital in the market not only did not reduce its positions to cover its positions, but instead increased its positions. At the same time, the trend of long positions reducing their positions and stopping losses is also continuing to expand.

This form of performance...

If this continues, I am worried that the pound exchange rate will further break through the previous range of fluctuations.

This triggered the long institutional groups and many long retail investors in the market to close their positions and stop losses.

Once the bullish confidence in the market begins to collapse and the pound exchange rate falls below the shock platform built in the previous period, it is very likely that an extreme downward trend will break out in advance. "

"An extreme downward market trend?" Gu Chijiang was slightly stunned and said, "That's impossible."

"From the market trend, nothing is impossible," Xie Hongxing said. "It is obvious that the bullish force in the market is continuously weakening, and once the pound exchange rate refreshes yesterday's market low, or even breaks through the 1.5000 mark, it will definitely cause the bullish confidence in the market to collapse."

"Isn't it said that... the Bank of England is still increasing its intervention in the market?" Gu Chijiang said, "Adding the expected referendum result tomorrow, there is no reason for the pound exchange rate to break downward."

"The news expectations and the market trend are indeed diverging at this time." Xie Hongxing said, "As for why the market trend is like this, I don't quite understand it, but... Mr. Gu, based on the market trend, in order to avoid extreme risks, I think... we should start to reduce some long positions."

Gu Chijiang frowned when he heard the trading strategy proposed by Xie Hongxing. He sighed and responded, "At this point, our entire fund's holdings are already in a floating loss state, and the pound exchange rate has already fallen to the low point of the recent shock platform.

Once we reduce our positions to cover the stop loss, it is very likely that we will reduce them to the lowest level!

In addition, there has been no obvious change in the underlying logic of bullish expectations, while the Bank of England is still increasing its intervention in the market exchange rate.

According to the previous market historical trend forecast...

The pound sterling exchange rate does not have any obvious momentum to break through the oscillation platform and make a downward breakthrough!

Overall, although stopping loss and reducing positions at this position can avoid the risk of extreme movements in the pound exchange rate, there is also a high probability of missing the opportunity for the pound exchange rate to rebound quickly and counterattack to the high point of the shock platform. "

Of course, in addition to the reasons mentioned by Gu Chijiang.

Another major reason is that he felt that the fund's holdings were in a floating loss state at this time, and the underlying logic of going long was clearly still there, which made him stop loss and close his positions to cover his losses, which made him somewhat unwilling.

"But if we don't reduce our positions and keep enough margin, what if the pound exchange rate quickly breaks through the support of 1.5000 points, triggering a huge amount of long positions to close and cover, thus forming an extreme market trend of downward breakthrough, then we will become more and more passive." Xie Hongxing said, "The key is that the pound exchange rate is at the low level of the oscillation platform, but the net long position in the market is still sharply reduced, which gives me a very bad feeling."

"Let's wait and see..." Gu Chijiang hesitated for a while and said, "Although the short-selling power in the market is increasing, it has not formed a repressive advantage. Moreover, after the British pound exchange rate opened sharply lower yesterday, it also rebounded quickly in subsequent market transactions and recovered all the lost ground, didn't it?

I believe the Bank of England is still very determined to maintain the stability of the pound sterling exchange rate.

I also believe that the result of tomorrow's referendum will definitely be to continue to stay in the EU, and there will be no surprises.

With the support of these two underlying logics, it is impossible for the numerous major long institutions in the market not to fight back.

Therefore, the probability of a rebound in the pound exchange rate at this position is very high, and the probability of continuing to maintain a violently volatile trend is also very high.

Even if we want to reduce our positions, we have to wait for the pound exchange rate to rise, and for the other major long institutions in the market to fight back.

It will only work if it rebounds to near the high level of the oscillation platform."

"But what if..." Xie Hongxing said worriedly.

Gu Chijiang waved his hand, interrupting Xie Hongxing's words, and said firmly: "There are not so many chances. We can still continue to take a look at this position and continue to wait and see."

After that, he quickly connected the instant messaging of the two affiliated institutions, Huifeng Global Hedge Fund and Mitsui Yoshitomo Investment Company, and asked Godfrey, the manager of Huifeng Global Hedge Fund, who has the most market intelligence and the largest investment scale, "Mr. Godfrey, the trend of the pound exchange rate this morning is obviously somewhat below expectations. Supported by the good news, it did not rise but fell. What do you think of this trend?"

Godfrey stared at the pound exchange rate, his expression still calm at this time, and responded: "Mr. Gu, don't worry too much. In the recent trend of the pound exchange rate, it is rare that it does not fall during the Asian trading stage, but often when the trading time enters the more active European and American trading stages, the pound exchange rate can recover its lost ground.

This morning's decline is based on our analysis and judgment.

This is mainly due to the fact that many major short-selling institutions, such as Huayin International, Aberdeen Asset Management, Huayi Capital, etc., took advantage of the market sentiment, concentrated their funds and jointly sold off the market.

But there is no doubt...

The strength of these major short-selling institutions alone is not enough to break through the support level of the oscillation platform.

It is also not enough to really cause panic among the many major institutional investors in the market.

My suggestion is that at this point, you can continue to increase your long positions, and then wait for the short-term bearish force to weaken and the pound exchange rate to rebound quickly, then reduce the newly added long positions at low levels. In this way, through intraday trading, you can relatively reduce the cost of holding positions and avoid greater passivity. "

"Mr. Godfrey, is there any more news about the Bank of England?" Sato from Mitsui Yoshitomo Investment Company also asked at this time, "According to the news from the currency exchange trading center of our group's investment bank, it seems that underground banks around the world and in black market transactions everywhere, many trading companies and investment companies that hold a large amount of pounds are quickly selling their pounds and accelerating the conversion into US dollars, which have better liquidity and a more stable exchange rate in the near future.

Although the exchange rate of black market transactions cannot be compared with the market exchange rate.

However, the occurrence of this situation actually shows that in the global trading market, the vast majority of institutions, investors, and trading companies are unwilling to hold pounds before the referendum results come out!

I'm worried that this phenomenon will continue...

It will affect the trend of the pound exchange rate in the formal market, and will lead to more aggressive short selling and long-selling by short-selling institutions in the market. "

"Regarding the phenomenon mentioned by Mr. Sato..." Godfrey took over and said, "Our agency has long noticed it and has conducted detailed analysis and discussion. We believe that the occurrence of this phenomenon will not change the trend of the pound sterling exchange rate, and will not affect the referendum results tomorrow, that is, on the 23rd.

At present, there are actually the underlying logic and fundamental factors that can determine the direction in which the pound exchange rate will eventually break through.

Just two o'clock.

One is the direction of tomorrow's referendum results, and the other is the Bank of England's determination and strength to maintain the exchange rate market.

At present, with regard to the direction of tomorrow's referendum outcome, judging by the preliminary vote count, the attitude of the British government, the collective long positions of many major European institutional investors, and other factors, there will be no surprises in the referendum outcome.

The Bank of England is determined to maintain the exchange rate market and intervene in the foreign exchange market.

According to the latest intelligence from our agency.

Yesterday alone, the Bank of England released $100 billion of foreign exchange reserves into the market. At the same time, through its affiliated financial institutions, it also added more than 30 long positions in the trading market.

This shows that the Bank of England is very determined to maintain the foreign exchange market.

As the issuer of the pound, the Bank of England has many cards to play if it wants to maintain the market exchange rate of the pound.

By analyzing these two underlying logics, we can easily come to the conclusion that the market's bullish expectations have not changed at all.

The reason why the exchange rate of the British pound has fluctuated more and more violently in recent days.

It is just caused by the emotional disturbance in the market and the increasing amount of speculative funds during the day.

Considering the direction in which the pound exchange rate may eventually break through, do you think that being an ally of the Bank of England has a higher chance of winning, or being an opponent of the Bank of England has a higher chance of winning? "

"Without a doubt, the chances of winning as an ally of the central bank are definitely higher." Gu Chijiang replied with a smile, "Mr. Godfrey still has a clearer view of the pound exchange rate trend and a more thorough analysis. Indeed... the underlying logical expectations can determine the final breakthrough direction. Before that, everything is just emotional disturbance, and as fund managers, we must not be carried away by emotions."

Originally, he was unwilling to stop loss and reduce his position at this point.

Now, after Godfrey's analysis, he was even more confident in continuing to hold the position.

"But as far as I know, the current foreign exchange reserves of the Bank of England in US dollars are not high, right?" Sato still had a lot of concerns in his heart. "Faced with the massive selling of pounds by countless institutions and companies in the global trade market, can the Bank of England really continue to sell dollars on a large scale before the referendum result comes out and stabilize the pound exchange rate in the trade market?"

Godfrey said: "Although the current US dollar foreign exchange reserves held by the Bank of England have decreased slightly compared to the previous quarter, they are still more than 3000 billion US dollars. The amount of funds in this foreign exchange reserve is enough to cope with various extreme situations, right? Moreover, after experiencing the historical event of Soros shorting the pound exchange rate in 1998, the Bank of England has been guarding against the extreme shorting of the pound exchange rate by Wall Street capital, so Mr. Sato does not have to worry at all."

"Okay!" Sato nodded. For a moment, he really couldn't think of any other risk points for long positions.

Moreover, when he turned his attention to the pound exchange rate trend, he saw that the pound exchange rate had rebounded to around 1.5185 points after hitting a low of 1.5200 points, and was likely to repeat yesterday's trend and further approach 1.5300 points.

So, after thinking about it, I didn't ask any further.

When Godfrey saw that the pound sterling exchange rate rebounded back to 1.5200, his eyes flashed and he quickly and decisively ordered Gerald to continue directing the trading groups in the trading room to further increase their long positions in the pound sterling exchange rate at the low point of the volatility range.

Along with the further increase of long positions by 'Huifeng Global Hedge Fund'.

At 10 am, the pound sterling exchange rate returned to 1.5230.

At 11 am, the pound sterling exchange rate returned to 1.5250.

Later, at 1:30 p.m., the pound sterling exchange rate reached a high of around 1.5270.

Later, just as Gu Chijiang of Tianhe Capital was preparing to close out some of his long positions when the pound exchange rate further rose to around 1.5300 points, in order to reduce the fund's long positions.

At 2 pm, the pound sterling exchange rate plunged again and quickly lost the 1.5250 mark.

Then, as market trading hours go on.

The net long position in the market began to decline sharply again when the trading time passed the Asian trading period and entered the early European trading period.

The net long position in the market has dropped from yesterday's peak of over one million lots to less than 50 lots.

Just as many major long institutions, countless intraday speculators and long retail investors in the market believed that the pound exchange rate would change after the time entered the European trading session, and would continue yesterday's trend, continue to rebound, and maintain a range of 1.5200 to 1.5400 points.

Unexpectedly...

The pound sterling exchange rate was attacked fiercely by the main short sellers at the beginning of the European trading session.

As a result, the market trend not only failed to continue the rebound, but instead fell further from around 1.5250 points to below 1.5200 points.

"Why is there so much pressure for a rebound? Could it be that Barclays International, the main hedge fund, is still frantically shorting the exchange rate?"

It is noted that the pound sterling exchange rate has shown weak rebound and the short-selling force in the market is becoming increasingly strong.

During the European trading session, in London, at the trading department of 'UBS International Andrea Hedge Fund', fund manager Andrea frowned, staring at the changes in the pound exchange rate. His original firm belief in going long gradually began to waver after he realized that the pound exchange rate was very likely to fall below the 1.5200 to 1.5400 point range and continue its downward trend.