Close Trade: 2007-05-21 12:05
As I expected, EUR/GBP met resistance at .6850 and then turned lower during this morning’s Euro/Asia trading session. The Euro sold off against the Dollar big time as the interest rate cut outlook in the US seems to be waning – this affected Euro crosses across the board.
I close this trade on the idea that the possible future rate hikes in the UK have been priced in and may no longer something traders are looking at. The markets are still forecasting rate hikes in the EU, so the underlying trend may be long EUR/GBP for now.
Close trade at market (0.6830) for a gain of +10 pips
It’s a small win, but a win nonetheless. Stay tuned for the next trade idea!
Trade Update: 2007-05-20 21:20
Nothing much has changed fundamentally for either the Euro or GBP, which means I expect the pair to continue to range until Tuesday when we get the German Zew Economic data. Traders are looking to scale down their positions and take profits in Sterling, but I do feel that the interest rate differential will support short EUR/GBP at .6850.
Our position has come close to profitability, as it hit a low of .6824 before turning back up. I will look for resistance at .6850 and the pair to turn lower. If it does not hit our target after a second go, I will close out the trade – hopefully before Tuesday’s data.
Trade Update: 2007-05-15 17:15
We are currently short EUR/GBP as we were triggered short half our normal position size at .6840. The pair made a small rally to .6855 as UK inflation numbers came in pretty much as expected. This rally was limited as traders still believe we may see two more rate hikes as inflation remains above the Bank of England’s target of 2.0%.
Technically, this pair looks overbought for now and we are seeing divergence on the 4 hour chart as the pair rallies while the stochastics begin to trend down.
We do have more data to sift through later as we are expecting more data, most notably the BoE quarterly Inflation Report, in the upcoming Euro trading session.
For now, we will hold onto our trade. Good luck my friends!
Trade Idea: 2007-05-14 12:57
Good Day Mates! Just wanted to point out that we may have a nice little technical setup as EUR/GBP traders near it’s previous high on the 4hr chart. Fundamentally, the Euro has been rally on interest rate hike speculation. Is this fully priced into the pair? Maybe…maybe not, but it looks like the resistance is holding for now.
In the UK, producer prices rose which should support the Sterling in the longer term. Also, with the most recent interest rate hike from the Bank of England, the interest rate differential is in favor for the British Pound vs. the Euro. So, we will look for a short term bearish play on the pair, looking for a quick 20 pips or so.
Short half position EUR/GBP at .6840, stop at .6860, pt .6820
Please remember to never risk more than 1% of your account on any trade. Please adjust your position sizes accordingly.