Trade Example: When A Hawk Turns Into A Dove

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In this video, we're going to demonstrate how Forex Source subscribers made money trading a sentiment shift involving the Pound versus U.S. Dollar, but any Pound pair would've worked, this week.

Now the move we're going to be looking at here, as I said, is the Pound-Dollar. You can see that move down there. So what we're going to do is break this down and see how you could have predicted and caught this move using our market commentary. So, first of all, we need to understand the context, or the baseline surrounding this pair before the move took place.

And that is very simple on this one. If we scroll down, we can see the actual headline in the news that broke to cause this move. The context is in these three words, "BoE Saunders, Hawk," right? That's the context. So Michael Saunders was giving a speech that was scheduled on the calendar. And he was or is a Hawk.

That's the context, okay? Now once that baseline is in place, and if you're wondering how you can figure out whether or not the Central Bank members are Hawks or Doves, if you go to our ... If we just quickly over to our currency research section here, we actually have Hawks and Doves cheat sheets for the major central banks. And if we look at the Bank of England one just to give you an idea, we can see that all the members are on here.

And crucially their stance is also noted. So for example, Michael Saunders here is noted as a Hawk. So you can prepare for this well in advance of any speeches that these guys are making. So that's the context. Now once the baseline is in place, the next step is to identify the type of breaking news that would generate the biggest market moving shift.

And of course, in terms of central bank comments. If we have a Hawk, the big trigger, the big shift is going to be if the Hawk says something dovish, right? Or if a Dove says something hawkish. Now we identified that. That was a pretty obvious shift to identify, because we knew that he was a Hawk. We knew he was speaking. So if he said something dovish, that was going to cause a move. Now all we needed next was the trigger.

In other words, we need that sentiment shift. We needed a Hawk to say something dovish. So whatever we identified ahead of time, we need that thing to actually take place. And of course, this is where the headline came in. So all that, all the three steps were basically in this headline. And he said that, "The prolonged Brexit uncertainty could warrant looser monetary policy."

Now normally a Hawk would target tighter monetary policy, higher interest rates. So for a Hawk to say that there could be a scenario where they would give up on that, and warrant looser monetary policy, that is pretty dovish. And that is going to cause the currency to fall. And the reason for that is if you look at the way the board's composed, usually you've got a balance of Doves and Hawks.

So if the Hawks give up and go over to the Dove, the balance is tipped. And the likelihood of lower interest rates and looser monetary policy actually increases significantly. Which of course is negative for the currency. So what we're going to do now is just quickly go to the charts. So remember, that was ... That headline was written at 7:59. So if you look at the candles here, you can see 7:58, 7:59 is here.

This candle just before the big one. Now the Squaw could have occurred at least a minute before. So we're looking at about 7:58 here. So usually the Squawk's about one or two minutes before.

So in this zone here, we have at least 30 seconds to one and a half minutes to kind of digest this headline, recognize that a Hawk has just been dovish. And then of course when the market reacts, the price is only going to go one way. This is a 60 PIP move down here.

And you can see once the market digested that and reacted, that's the kind of move you could expect. So if you're interested in kind of getting these kinds of moves, learning more about how our market commentary can help you interpret the news, and fundamental analysis into profitable trades like this, click the link below. And check out Forex Source.

Thank you for watching the video. And of course, please post your questions or comments below this video, because we do read them all. And we actually base our future videos on what you ask for. And before we go, don't forget to hit that button to subscribe or follow, so that you'll be notified every time we release a new video.

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If you find these weekly analysis and trade ideas useful, you’ll love Forex Source. There’s a link below were you can learn more about it

https://bit.ly/2otiFdo
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