Trade Closed: 2011-12-06 23:23
As I had pointed out in my Weekly Watch, EUR/GBP has been trading within a tight range over the past couple of weeks. After dipping down to the .8550 MiPs earlier this week, I saw that the pair rallied back up and was retesting the PWH just above the .8600 handle.
With the markets in consolidation mode waiting for the results of the EU Summit, I figured that we wouldn’t see the pair rally much higher and that the range would hold. In addition, the Stochastic indicator was in overbought territory, giving me an additional reason to go short.
I decided to pull the trigger and announced on my Twitter and Facebook page that I was shorting at .8600, with a stop at .8635, and a profit target at the weekly low around .8550. As usual, I risked just 1% of my account on this trade.
As it turns out, the euro was weakened yesterday thanks to some negative comments made by some European officials. The pound benefitted from the euro weakness, and surged ahead, allowing EUR/GBP to drop all the way down to my profit target by the end of the London session. Boo yeah, baby!
Since then, the pair has bounced off the PWL and bottom WATR and is now just chillin’ around .8530. Take note that this area has served as support in the past, so there is the chance that this could be the bottom for the week.
While this is a really nice technical setup, we should keep in mind though, that both the ECB and the BOE will be releasing their interest decisions later today. Normally, this is the type of setup that I’d love to take, but with the event risk surrounding the central bank statements, I think it’d be best to sit this one out.