Well, that was a pretty shallow pullback! EUR/GBP didn’t reach my second entry order as sellers are too excited to push this pair down so I’m gonna make some adjustments.
The U.K. had a three-for-three with its latest PMI readings, dishing out stronger than expected readings for the manufacturing, construction, and services sectors. This seems to be enough to reassure market watchers that the economy is doing mighty fine even with all the Brexit-related uncertainty, reducing the odds of additional BOE stimulus in the coming months.
Because of this not-so-downbeat outlook, the pound has been able to advance across the board, barely even looking back from its rally against the euro. Fortunately I was able to enter a small position at market near the 38.2% Fib before the impressive services PMI reading was released.
Unfortunately, price didn’t retrace up to the channel resistance and my second entry order at .8475 so I’ve only got 0.25% on the line for now. I’ve already trailed my stop loss down to my market entry for a risk-free trade but I’m considering adding to my position and aiming for a larger profit target to take advantage of the pound rallies.
In terms of event risks, we’ve got the U.K. manufacturing and industrial production numbers due on Wednesday just before the BOE Inflation Report hearings. Analysts are expecting to see a 0.4% drop in manufacturing production and a sharper decline could erase the pound’s gains so I’ll keep close tabs on that release. I’ll also be on the lookout for dovish remarks during the BOE event to see if I should be exiting this trade early.
If these catalysts turn out bullish for the pound, I’ll hold on to my position ahead of the ECB interest rate decision on Thursday. No actual monetary policy adjustments are expected for now but the weak flash CPI readings from the euro zone could keep policymakers dovish. I’ll keep y’all posted on any quick trade decisions through my Twitter account so make sure you’re following me!
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.