Just as the Bank of England dared not go all out, dared not aggressively continue releasing its USD foreign exchange reserves, and forcefully maintained the GBP exchange rate.
As the US trading session further progressed.
At 12:00 AM Beijing time, the GBP exchange rate finally succeeded in breaking below the 1.5100 level again, plummeting over 200 points under the combined counterattack of major short-selling capital institutions in the market and massive short order suppression, bringing the GBP exchange rate back to the lower support level of the large oscillation platform between 1.5000 and 1.5400.
At the same time, amidst the continuous sharp decline of the GBP exchange rate in a short period.
The scale of open long and short positions in the market also changed dramatically, with net long positions rapidly decreasing from nearly a million lots to 500,000 lots again.
Furthermore, with the announcement of preliminary vote counting results from English regions such as the Shetland Islands, Orkney Islands, and Outer Hebrides.
In addition to the sharp drop in the GBP exchange rate trend on the online public trading market.
In the offline black market, the rapid decline of the GBP exchange rate was even more intense; by the time the GBP public trading market exchange rate broke below 1.5100, the black market GBP exchange rate had already fallen to around 1.4400.
And in this situation.
Various Wall Street short-selling capital institutions, which had already gained absolute initiative in the GBP public trading market.
Were also continuing to sell off large amounts of GBP, influencing the GBP exchange rate trend, intensifying the panic selling and run effect of numerous global capitals on the GBP, and simultaneously guiding more capital to further sell GBP.
"Hmm... looking at the changes in long and short positions in the market over the past hour, and the changes in the offline black market exchange rate, it seems the Bank of England hasn't shown any signs of further selling USD reserves and increasing long positions in the market."
Noticing that the GBP exchange rate's downward plunge was extremely smooth, without encountering sustained resistance from long positions inside or outside the market, Christine, the company's Chief Market Analyst at Goldman Sachs' Foreign Exchange Market Trading Department in Wall Street, at midnight Beijing time, speculated after synthesizing the latest market news changes and actual market trends,
"Could it be that the Bank of England intends to give up its defense? If that's truly the case... then our opportunity to concentrate our efforts to squeeze the market, induce various funds to continue selling, causing the GBP exchange rate to directly break through the 1.5000 level and collapse the bullish sentiment in the market, will truly arrive."
"At this moment, the news is largely leaning towards bearish sentiment," responded Dominic, the company's main foreign exchange trading fund product manager. "This period is precisely when various short-selling capital institutions in the market are aggressively releasing their sentiment, while various long positions are massively covering their stop-losses and taking profits.
At such a moment when internal market sentiment is overwhelmingly one-sided, and the news comprehensively supports short sellers' expression.
Even if the Bank of England were to strongly intervene in the market, further inject large-scale USD foreign exchange reserves, and massively increase long positions in the market, it would be difficult to curb the decline of the GBP exchange rate, and also difficult to contend with the combined force of the entire market's funds.
Therefore, I think it's very normal for the Bank of England not to act at this time.
Judging solely from the current market trends, various market information, and internal news, it's still hard to say whether the Bank of England will abandon its defense of the GBP exchange rate."
"Regardless of whether the Bank of England abandons this position..." Christine smiled and said, "It's always true that the short-selling capital institutions in the market have already taken the initiative, isn't it?"
Dominic nodded slightly and said, "That's natural."
"Then if we want to further expand our gains, it shouldn't be difficult," Christine said. "As long as the psychological defense line of 1.5000 for the long positions is completely broken, I think next... without too much manipulation of market sentiment, the long position holders in the market will further trigger stop-losses."
Dominic thought for a moment and said, "Let's wait and see. Although the current market sentiment and its trend direction are clearly leaning towards the short side, it's still not easy to break through and substantially fall below the 1.5000 level in one go, especially given that tomorrow's referendum result still has a high probability of leaning towards remaining in the EU, and most market participants' ingrained impressions and views on the oscillating market trend remain quite stubborn.
Moreover, at this moment, we cannot ascertain the Bank of England's attitude towards market intervention. To increase trading certainty and control the position risk of new trades.
I think it would be better for us to wait a bit longer, further understand the Bank of England's trading strategy and intervention stance regarding the GBP market exchange rate, before massively increasing our positions.
At this time, with the market trend still highly uncertain. Let other aggressive short-selling capital institutions in the market, as well as numerous speculative retail short sellers, test the market's true support level at 1.5000.
Given the previous trends, I still believe that the probability of success for a right-side opportunity at this time will be significantly greater than for a left-side opportunity."
"Alright," Christine nodded slightly, thought for a moment, and continued, "Although I don't think the GBP exchange rate can rebound from around 1.5000 and return to the 1.5300 level, there's no problem in further understanding the Bank of England's strategic plan and taking a higher-certainty right-side opportunity."
"Hmm," Dominic nodded and said, "I estimate... over the next hour or two, if there are no major changes in the latest market news, the Bank of England will most likely abandon the 1.5000 level."
"It's truly like a replay of the 'Swiss franc Black Swan' night last year!" Christine exclaimed.
"No, the situation the GBP exchange rate faces now, should be said to be more severe, more dangerous than back then," Dominic said. "After all, the number of open long and short positions in the market is completely on a different scale than it was then. I'm not exaggerating... with this volume of long and short positions, once market sentiment completely collapses, it's simply not something any central bank or capital institution can curb."
"Agreed," Christine said. "But it's clear that this time, the Bank of England has also learned its lesson. Since the Brexit referendum event, facing the continuous extreme volatility of the GBP exchange rate in the market, the Bank of England's market intervention actions have always been more rhetoric than actual action. Even when intervening with real money, it has been very restrained in deploying USD foreign exchange reserves, as if the Bank of England won't play its trump card until the official referendum results are released."
"In past financial crises, the GBP has always been a target for various capital attacks," Dominic chuckled and said, "After experiencing so much, even the most foolish would learn. In fact, for the Bank of England. The short-term intraday trend of the GBP exchange rate is not important.
From the Bank of England's perspective and considering its interests, what they need... is only the long-term stability of the GBP exchange rate, as this is what can truly stabilize the confidence of global capital holding GBP.
Whether it's an extremely volatile trend, a unilateral downtrend, or a unilateral sharp rise. All are unfavorable to global capital massively holding GBP and maintaining strong confidence in holding GBP.
In other words... If I were the Bank of England, I wouldn't take huge risks to forcibly prop up the market and stabilize the GBP exchange rate before the official referendum results are confirmed on the 23rd. After all, with such a massive scale of long and short positions. If one wants to stabilize the GBP exchange rate and forcibly prop up the market, the cost would be enormous.
However, if we wait until the official referendum results are confirmed on the 23rd, after a fierce battle between long and short positions in the market, a victor emerges, and the scale of long and short positions decreases significantly.
At that point, if the Bank of England re-enters the market to maintain exchange rate stability, the cost would be much lower. As for these short-selling and long-buying capital institutions in the market. In fact, studying their underlying logic reveals that no matter which institution participates in this speculation, its interests are not aligned with those of the Bank of England.
Therefore, if the market development and extreme volatility of the GBP exchange rate cannot be curbed. Then abandoning the strategy of forcibly propping up the market and aggressively intervening is also natural, logical, and aligns with its fundamental interests."
"If we exclude the aggressive interference from the Bank of England..." Christine smiled and said, "Then the probability of short-selling capital winning in the current market should be redefined."
"In my opinion, it's very difficult for the long positions to turn the tide in this situation," Dominic said. "I've heard that Citibank still has billions of GBP stockpiled, waiting to continue selling to suppress the GBP exchange rate, thereby increasing the profit margins on their large-scale long positions in the GBP exchange rate trading market."
"It's not just Citibank," Christine said. "Even 'UBS' is secretly selling GBP."
Dominic said with slight surprise, "I hadn't expected that. It seems... the changes in long and short positions in the market are much more optimistic than we thought!"
As the two conducted an in-depth analysis of market trends and discussed trading strategies.
At 12:20 AM, the GBP exchange rate had already fallen below 1.5050, setting a new intraday low, and was increasingly approaching the final psychological defense line of 1.5000 for long positions.
And as the GBP exchange rate continued to fall, and net long positions in the market had dropped to 300,000 lots.
Inside Tianhe Capital, Hong Kong City.
Gu Chijiang, who had previously been forced to close a large number of stop-loss positions below 1.5100, and then massively, almost fully, chased higher to go long above 1.5200, now stared at the GBP exchange rate's market trend with a terribly grim face and clear signs of anxiety.
At this moment, the entire main hedge fund he managed.
The full position of nearly 200,000 lots of long GBP exchange rate positions had accumulated losses exceeding 50 million USD.
This made his current psychological pressure feel like carrying a mountain, making him a bit breathless.
Logically, with position losses reaching this point and positions at their maximum, his optimal strategic choice would be to unconditionally reduce positions and stop losses, to avoid even more severe losses to the fund's holdings should the GBP exchange rate subsequently break completely through the oscillation platform and the most important support line.
However, after experiencing the market's fluctuating trend several hours prior, when the GBP exchange rate strongly rebounded from around 1.5050 and soared to 1.5300.
Especially after trading with stop-losses at the bottom and chasing higher to increase positions.
Facing the weak oscillation of the GBP exchange rate at this level, he had to consider more, had to worry that after he took stop-loss cuts, the GBP exchange rate would strongly rebound and quickly recover losses.
After all, despite short-term bearish news in the market, from a broader perspective, the expected outcome of tomorrow's referendum was still unlikely to change, and the large number of major long players in the market had not yet lost confidence, meaning the entire market still had the momentum for a strong bullish counterattack.
With these concerns, he became particularly hesitant in implementing his stop-loss and position reduction trading strategy.
"Mr. Gu, I think we... should still reduce positions and stop losses," noticing Gu Chijiang's hesitant expression, trading team manager Xie Hongxing pondered for a moment before dutifully reminding him, "The rate at which net long positions in the market are sharply decreasing is a bit too fast. This indicates that a large number of long position holders in the market are frantically covering and closing positions, and it also shows that the long and short forces in the market are rapidly becoming imbalanced."
"I know, but the momentum for a long-position counterattack still exists!" Gu Chijiang said. "Moreover, with tomorrow's referendum results still uncertain, and the vast majority of speculators and investors in the market still holding an oscillating view on the GBP exchange rate trend, this support line around the 1.5000 level is still very strong. Let's wait and see... I think this level can still rebound.
We must firmly hold our positions and not easily waver in our confidence. Last time, we wavered in our confidence, which led to the market slapping us back and forth, costing us tens of millions of USD!"
After speaking, Gu Chijiang's gaze turned back to the GBP exchange rate trading screen, staring intently at the GBP exchange rate's trend, his expression perpetually tense.
And just as he was extremely nervous, with sweaty palms.
The GBP exchange rate plunged to a low of 1.5026.
As expected, under the relatively consistent oscillation trend expected by the entire market, and also due to numerous profitable short-term short funds choosing to cover their positions to take profits, the continuous sharp decline of the GBP exchange rate was finally curbed.
Next...
At 12:36 AM, the GBP exchange rate began to rebound from its low of 1.5026.
At 12:49 AM, the GBP exchange rate recovered 1.5050, further strengthening the market's rebound expectations.
At 1:00 AM Beijing time, the GBP exchange rate rebounded and recovered the 1.5100 level, and net long positions in the market resumed growth.
At 1:17 AM, the GBP exchange rate rebounded to 1.5142.
Then, just when the entire market, including most intraday speculators, numerous major long-position institutions, and even many short-position institutions, widely believed that the GBP exchange rate would likely rebound further, continuing to recover 1.5200, and even 1.5300, repeating the previous large oscillation pattern.
Suddenly, on the GBP exchange rate market, consecutive large-scale main sell short orders instantly poured out.
Directly and with lightning speed.
Slamming the GBP exchange rate back down to around 1.5020.
And at the same time, the number of open short positions in the market rapidly surged, with numerous large capital short-selling institutions worldwide beginning to aggressively increase their short positions, fiercely concentrating their selling pressure.
(End of Chapter)