EUR/GBP: Confluence at the Trend Line – Trade Closed

Trade Idea: 2013-05-22 02:05

EUR/GBP Chart

There goes the trend line on EUR/GBP! But no harm was done – I was able to exit relatively unscathed.

Because of weaker-than-expected U.K. inflation, the markets unloaded their GBP holdings, causing EUR/GBP to spike up and pierce right through the .8500 confluence zone.

The across-the-board weakness that we saw in the U.K.’s inflation reports pretty much confirms that price pressures are really dying down. Not only does it support the BOE‘s downward revision to its inflation forecasts, but it also provides the central bank with legroom to roll out more QE – which is bearish for the pound!

In any case, I was able to dodge a bullet by moving my stop to my entry point before things got ugly.

Stopped out at .8484: -2 pips / -0.08%.

While I feel relieved I didn’t take a hit from this trade, I do feel a bit bummed out that I wasn’t able to bag a small number of pips before the market turned. Looking back, I should’ve probably locked in a couple of pips when price stalled at the week open. Then again, I suppose it’s just natural to feel that way, especially since the trade spent an entire week in the money. Looking at things objectively, I still think I was able to make smart trade decisions and manage this trade pretty well.

Anyway, I hope you guys had better luck!

In other news, I just went long on GBP/JPY. Stay tuned for a full update on that trade idea – I’ll have it up real soon!

Trade Idea: 2013-05-15 03:40

EUR/GBP Chart

With those shallow retracements on the JPY pairs, I decided to take a look at some of the other cross pairs for my setup for the week. I didn’t have to look too far though, as EUR/GBP – one of the pairs I monitor on my Weekly Watch – just presented a pretty sweet technical setup.

Price just bounced off the .8500 and top WATR cluster zone, which just happens to line up with a falling trend line as well. Stochastic also just crawled out of overbought territory, indicating to me that buyers may have run out of steam for this week already.

By now, I assume you know where I’m headed. That’s right, I’m hopping in short fellas!

But of course, no trade is complete without a look at the fundies, and I’d just like to point out some potential event risk on this trade.

This coming London session, we’ve got U.K. employment data and potentially the BOE inflation report. These reports can sometimes cause volatility in the markets, so I’m going to have to pay close attention to them. I’m also a little concerned about the euro zone flash GDP report, but seeing as how it’s expected to post another negative figure (-0.1%), I think it may even help out my trade a little bit.

That said, in order to account for the event risk, I’ll only be risking 0.3% of my account on this trade.

Here’s what I’ve done:

Short at .8482, stop at .8530, take profit at .8400.

The way I’ve set up this trade, I stand to gain about 1.71% for every point of risk, so it’s a pretty good trade-off. I’ll be sure to update you guys as this trade develops. Good luck to those of you joining me!

Risk Disclosure
Weekly Watch: May 13 to 17, 2013
Q1 2013 Trading Performance
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