Fading Into the Downtrend on EUR/GBP – Closed

Trade Closed: 2013-11-19 9:10 ET

It’s been a slow week for EUR/GBP and with the BOE meeting minutes coming up tomorrow, I decided to close up the trade and take profits.

EUR/GBP 1 hr forex chart

EUR/GBP 1 hr forex chart

Up above, I have the one hour forex chart EUR/GBP marked up with the levels from this week’s Weekly Watch. Again, the market looks like it’s in consolidation mode so to me it looks like I’ve squeezed as much juice as I could out of this orange. Also, I wanted to focus on my new trade idea on GBP/JPY, and didn’t want to double up my risk on Sterling. So, I decided to close my remaining position at market (.8403).

1st half: +50 pips
2nd half: +47 pips
Total: +48.5 pips avg./ +0.40% gain

Not a bad gain on this trade and I really don’t think the down move is done yet in EUR/GBP. But we’ve seen so much bullishness in the Pound as of late that I think the supply of buyers might be a little thin at this time. Just a gut feeling.

So for now, I’m gonna focus on my GBP/JPY trade idea and then reassess after the BOE minutes tomorrow. Thanks for checking out my blog!

Trade Adjustment: 2013-11-13 21:55 ET

It looks like the trend in UK employment data continues as we saw another positive read to the UK Claimant Count number (-41.7K vs. -30K forecast) in Wednesday’s session.  We also got positive comments from the Bank of England as they consider possibly sooner than they previously forecasted.  Both events were a catalyst for Sterling strength across the board, including EUR/GBP.

With the market now testing .8400, I decided to make an adjustment as I didn’t want to risk giving back my profits on upcoming UK retail sales data.  This data has been a bit more mixed lately, so the probability of a positive read is not as high as the UK employment data.  Here’s what I did:

Closed half of my position at .8400.  Adjusted stop to .8450.  Maintaining my profit target at .8300. 

This locks in a 0.20% gain and makes it a risk-free trade with room for more profit if the market continues to go my way.  My profit target hasn’t changed, but I’m making it a soft one in that I’ll look to adjust again rather than take profit, depending on the market story.

That’s it for now…thanks for checking out my blog and stay tuned!

Trade Idea: 2013-11-12 08:01 ET

After seeing a weaker-than-expected UK CPI knock down the Pound in today’s session, I look to fade back into the downtrend in EUR/GBP.

EUR/GBP 1hr forex chart

EUR/GBP 1hr forex chart

As I mentioned in this week’s Weekly Watch, UK data may cause a bit of volatility for pound pairs this week.  We just got UK CPI data coming in lower-than-expected, causing Sterling to take a hit across the board.  I think this is a good thing for me as I’m bearish on EUR/GBP, not only because of the trend lower but also the recent ECB rate cut.  Stochastic is also indicating that the pair might be overbought in the short term.  Also, the trend for the rest of this week’s UK data (employment and retail sales) has been generally positive over the past few months.

I’m going to short this pair on a slight tick higher to the MiPs level, with my stop above the next major handle, and a profit target around last week’s lows.  Here’s what I am going to do:

Short EUR/GBP half position at .8450, stop at .8510, profit target at .8300

Remember to never risk more than 1% on any trade, focus on the process, manage yo risk through correct position sizing, and don’t forget to journal everything you do!

With this trade structure, it’s a little over 2.5:1 potential return-on-risk with only 0.50% risk. Of course, I could be totally wrong with this trade, but if not and the market moves lower in my favor I may add to my position if it goes my way.

  • morgan

    It’s a good position. You short EUR/GBP near the resistance and you even take the fundamental and trend into account. I think you got a real shot here.

    My advice, how about you change the TP to 0.8285? This is because 0.8300 is a big rounding number. While it may touch it in the future, But I think it will rebound first before touching 0.8300.

    • cyclopip

      Thanks for your advice morgan…I appreciate ya taking the time to share you thoughts! I’m stepping outta this pair for now though with the BOE minutes coming up tomorrow. Stay tuned because I might just jump back in this one!

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