"Holy cow, what's going on? Why did it suddenly surge?"
Seeing the British Pound exchange rate suddenly soar, returning to the 1.5300 level while volume expanded rapidly, Gerald, the trading team leader at the Hong Kong office of the "HSBC Global Asset Management Universe Hedge Fund" who had been monitoring the Pound's trend, said in surprise.
"Given this unusual movement... could there be some positive news?"
Next to Gerald, trader Gene said,
"It's possible."
Gerald pondered for a moment and responded,
"But at this time... what positive news could possibly be stimulating it?"
Just as he was puzzled, the door to the trading room was pushed open.
Ernest, the fund's market research director, walked in, report to the fund manager, Godfrey, with a face full of pleasant surprise:
"Mr. Godfrey, the latest market news is that dignitaries from Germany and France are about to visit the UK this weekend for an unofficial meeting. They will have dinner with the British Prime Minister and the Finance Minister. It is estimated to be regarding the June 23rd Brexit referendum."
Godfrey laughed,
"Is that so? For us, and for all the bulls in the Pound exchange market, this is major positive news."
Ernest replied,
"The itinerary is confirmed. There is no mistake."
Godfrey nodded slightly and said,
"Looking at the reaction of the market, it can't be fake news."
Gerald said,
"It seems the referendum result on June 23rd is basically confirmed to be leaning toward the bullish side, right? And with Germany and France taking the initiative for this weekend's meeting, they will likely offer some more favorable conditions for the UK to remain in the EU."
Godfrey smiled and replied,
"This is entirely predictable. As long as the weekend meeting reveals any positives, it will provide a massive boost to the bullish sentiment in the Pound exchange market."
Gerald added,
"It shouldn't just be a boost in sentiment. If the talks go well, it will also provide a major boost to the future recovery of the UK economy. At the same time, this clearly releases an expectation that the referendum result next week will lean in our favor, providing underlying logical support for the bulls' attack."
"The Pound exchange rate has climbed to the 1.5360 level,"
Gene reported in real-time.
"It seems the major bullish institutions are all taking action,"
Godfrey smiled, then turned to Gerald and ordered,
"Continue to go long. Stimulated by this positive news, the main bearish forces in the market must be powerless now. As soon as the Pound exchange rate crosses the 1.5400 mark again, the bears' confidence and conviction in their positions will undoubtedly... collapse once again."
"Understood,"
Gerald nodded hurriedly.
Immediately, he instructed the traders to continue increasing their long positions in the Pound, assisting the exchange rate in continuing its upward breakthrough.
At the same time...
As the news fermented further, major bullish institutions like "Pacific Capital," "UBS International," and "Nomura Bank" also instantly launched their counterattack against the bears.
And as these bullish institutions used the change in news to strike back, the main bearish institutions—primarily "Huayi Capital," "Huayin International," and "Aberdeen Asset Management"—fell back into the dire situation of rapidly expanding losses on their positions.
"Mr. Su, the sentiment in the Pound exchange market is undergoing a massive change."
As the Pound surged past 1.5360, Qu Zecai, the trading team manager at the "Huayi Capital" office in Hong Kong, reported within the "Huayi Chengyuan No. 1" hedge fund trading room:
"Long positions in the market are exploding, while many short positions are being covered and closed. If we continue our grid trading to increase short positions, I fear that with the bulls holding absolute dominance, it will cause us even greater losses and an even more passive situation."
"Is it because of a change in market news?"
Su Yi did not answer Qu Zecai directly, but instead asked with a smile.
Qu Zecai nodded.
Before he could speak, Frederick, manager of the "Aberdeen Asset Management Evolution No. 1" hedge fund, who was connected in real-time, responded:
"The news from 5 minutes ago is that French and German dignitaries are visiting the UK this weekend. There is also an internal EU economic meeting this weekend that will have a significant impact on the Pound's direction."
"It's not just the influence of those two pieces of news,"
Kong Fansheng of 'Huayin International's' investment department added.
"According to just-released information, 'UBS International' has publicly issued a future outlook report for the Pound, along with data on the long positions they hold.
According to their report, 'UBS' believes the UK's economic performance in the second half of the year will be better than the first.
Coupled with the Bank of England's aggressive monetary policy to defend the currency and the Federal Reserve's delay in raising interest rates, they expect the Pound to perform well in the second half, expecting it to stably stand above the 1.7000 mark.
As for their position data, frankly, it exceeds what major institutions expected: UBS currently holds 250,000 lots of long positions, nearly a three-year high."
"250,000 lots?"
Hearing this, Meng Shengfei of 'Huayin International's' second investment department was clearly surprised.
"That's even more than the 'dead bulls' at 'HSBC Global Asset Management.' I never expected that the one forcing us into a corner in the market was 'UBS'."
Frederick said,
"The point isn't how many long positions 'UBS' holds. The key is their influence on market sentiment. Everyone knows their influence in the global foreign exchange market is massive."
Kong Fansheng said,
"If their influence wasn't significant, the Pound wouldn't have surged over 80 pips in these twenty or thirty minutes. With 'UBS' speaking out so publicly, our situation has become passive. The strategy of containing the bulls at the 1.5300 line... I'm afraid it won't work anymore."
Meng Shengfei said,
"We definitely cannot hold our ground blindly. With sentiment clearly reversed, if we stick to a certain level, we will only waste capital. We cannot contain the bulls' full-scale squeeze."
"With bullish drivers and major institutions guiding the market, we naturally cannot hold the 1.5300 defense line now that the market sentiment has changed."
After fully understanding the market info, Su Yi said,
"Pause adding new positions. Once the market has digested the news and the sentiment reaction is complete, we will concentrate our capital and add significantly to our short positions to counterattack."
In the financial markets, whether dealing in stocks, futures, or foreign exchange, Su Yi believed one must follow the trend.
At this moment, due to positive news and the deliberate guidance of major long institutions like "UBS" and "HSBC," the bullish power was strong.
If they forced capital in to block the rise, it would be like trying to block a flooding dam; it would only waste capital.
Instead, it was better to let the market trend upward temporarily to fulfill the immediate positive news.
Once the bulls had realized their profits or felt the positive sentiment was exhausted, that would be the moment to increase short positions and strike, achieving a much more effective result.
Although the sharp rise in the Pound would cause significant losses to their positions, as long as they were not liquidated and maintained sufficient margin and cash reserves, those losses would eventually narrow once the bullish sentiment turned weak and traders cashed out.
Furthermore, in Su Yi's view, the current positive news was fundamentally insufficient to reverse the trend of the Pound.
He knew that the private negotiations between the dignitaries would yield no real results.
Since the referendum had become a popular mandate, and the direction had slipped out of the British government's initial expectations, no one could unilaterally stop the referendum or forge the result.
Therefore, no matter how "UBS" or "HSBC" maneuvered, they could not change history or the outcome.
Kong Fansheng agreed,
"Yes, the counterattack must be at the point of divergence in market sentiment to have miraculous results. Generally, intraday short-term traders have profit targets of 50 to 100 pips. Given the recent frequent volatility, they dare not hold positions for long.
So, psychologically, at the 1.5400 level, they will encounter immense pressure from profit-taking. We wait for them to close their positions, then strike. The effect will be much better."
Meng Shengfei said with a smile,
"Good steel should be used on the blade. I understand this change in strategy."
Frederick thought,
"I expect the bullish-bearish divergence Su mentioned will manifest during the US trading session. The weekend news doesn't touch the underlying logic of the Pound's trend. I believe once the US session begins, funds from 'BNY Mellon,' 'Citibank,' and 'BlackRock' will make their moves."
And just as they predicted... as the market progressed, the Pound pushed toward the 1.5385 level and began to encounter strong resistance.
Numerous intraday speculators began to lock in profits.
"Sigh... it doesn't seem to be going up,"
Someone on a forum sighed after watching the price oscillate for over ten minutes near 1.5385.
"It's normal that it can't go up. In recent days, it's been oscillating between 1.5300 and 1.5400. Neither side can defeat the other for now. It won't form a sustained one-sided breakout."
"Isn't there huge positive news?"
"An uncertain, unofficial meeting... 100 pips of rebound is probably enough."
"The 1.5400 level has huge pressure. Better to take profit."
"Before the referendum, only volatility is expected, not a breakout."
"Exactly. Intraday orders are safer."
Under this consensus among speculators, as discussion increased and the market turned toward the US session, Su Yi gazed at the market trend.
Finally, he issued the order to the traders and the joint team from "Huayin" and "Aberdeen" to concentrate on increasing their short positions and counterattacking the main bullish forces.
(End of Chapter)