Trade Idea: EUR/GBP Trend Line Pullback

I’m gonna try to play the U.K. top-tier events this time with this EUR/GBP correction play ahead of the BOE statement. What do you guys think?

On the pair’s 4-hour time frame, I’m seeing an ascending trend line connecting the latest lows of price action. Applying the Fib tool on the recent swing low and high shows that the 61.8% level coincides with the trend line and the .7900 major psychological mark, which is also right around an area of interest.

EUR/GBP 4-hour Forex Chart

EUR/GBP 4-hour Forex Chart

As I tweeted yesterday, I already jumped in a long position at market (.8015) ahead of the U.K. CPI release and risked 0.25% of my account. I’ve still got another long order at .7925 for another 0.25% risk. I placed my stop below the trend line, swing low, and the .7800 major psychological support. Stochastic is indicating oversold conditions anyway so a bounce could be in order.

I’m thinking that the BOE statement might contain another set of downbeat remarks on the U.K. economy, especially since the recent set of data has been disappointing. Aside from that, analysts over at the IMF and other finance officials have been buzzing about the risks that a potential Brexit could pose.

The euro is also looking weak at the moment, possibly due to resurfacing concerns about Greek debt, but this shared currency appears to be drawing support in risk-off days. Still, I’ll be playing this one carefully and I’ll be ready to close early if a trend line breakdown might take place.

Here are my trade details:

Long EUR/GBP at .8015 and .7925, stop loss at .7775, initial PT at .8175.

I’m risking a total of 0.50% of my account on this setup, assuming my second buy order gets triggered as well, and going for a 1:1 return-on-risk. Don’t forget to check out our risk disclosure if you’re planning on taking a similar setup!

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