Is GBP/USD headed for more losses? Here’s a forex trade for those who think the pound is a weaker bet than the dollar!
If you were around during the BOE’s “Super Thursday” event yesterday, then you should know that the Monetary Policy Committee (MPC) members aren’t feeling too super about the economy as before. For starters, Ian McCafferty, the lone hawk in the group, turned to the dark side and stopped his calls for a rate hike. The MPC also decided to not only cut its growth forecasts, but extend its low inflation estimates. Uh-oh.
On the technical front, we can see that GBP/USD is having trouble breaking above 1.4600. This is interesting not only because it’s a major psychological handle, but because it’s also near a 61.8% Fib and 200 SMA resistance on the 4-hour time frame. Oh, and Stochastic is also in the oversold zone! Neat, huh?
After seeing those long wicks and a couple of bearish candlesticks, I’ve decided to short the pair at market. Here’s what I’m planning for this setup:
Shorted 0.25% risk at market (1.4558), max stop at 1.5300, initial profit target at 1.4100
Shorted 0.25% at 1.4900, max stop at 1.5300, initial profit target at 1.4100
I know that the Fed members aren’t excited about further raising interest rates themselves, but I think that the Greenback has better chances against the pound especially when we’re mostly trading risk-averse environments. In any case, I’ll keep close tabs on this trend play and see if there are any catalysts that might change Cable’s overall downtrend. Maybe today’s NFP report can give the pair a clearer direction?
What do you think? Has the pound taken enough hits against the dollar, or do you also think that the chart above reflects a retracement that we should take advantage of?
Don’t hesitate to share your two cents!
P.S.: Remember to never risk more than 1% of a trading account on any single trade and to adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Better yet, read the Risk Disclosure!