GBP/USD: Buying the Dip

Trade Idea: 2011-6-15 2:32

GBP/USD 1-hour Chart

I’ve been a tad too conservative with my entries for the past three weeks. But when I kicked it old school and listened to Grover Washington Jr. today, I learned that “Things come to those who wait but not for those who wait too long.” So I decided to play it aggressive by buying GBP/USD ahead of the jobs report.

Don’t get me wrong. I didn’t pull the trigger just so I could prove something to myself. The technical setup is pretty sweet!

On the 1-hour chart, we see that the pair is finding support around 1.6350 which is coincidentally the 38.2% Fibonacci retracement level if you connect Monday’s low to yesterday’s swing high.

I backtracked a bit and noticed that price has previously found support around the area. Finally, Stochastic indicates that the pair is already oversold and may be headed up.

Fundamentally, I chose to go long pound versus the dollar because of what I have heard from the Bank of England (BOE) member Marin Weale. According to Weale, the BOE should raise rates soon, even if economic figures haven’t been all that optimistic.

Inflation, as Pip Diddy and Forex Gump have mentioned, has risen to more than twice the bank’s 2.0% target at 4.5%. With the number of BOE members voting for a rate hike up at 3, I think we’ll be seeing a rate hike much sooner than we think!

I also believe that the ongoing debt crisis in Europe is helping the pound. If investors are uncertain about putting their money in the euro, which currencies can they go to? The pound of course! I think this is another reason that the pound was able to gain the past two days.

Of course, my trade faces some event risk. I’m keeping an eye out for the results of U.K.’s employment data retail sales report. If those reports come in worse than expected, I will probably close any open positions I have.

So here’s what I’m going to do:

I bought the pair at 1.6370 and set my stop at 1.6320. I know there are a lot of event risks on tap, so I only risked 0.5% of my account.

If the market goes my way, I will add one more position (same size as my first one) every fifty pips. I will also move my stop to my last entry as I go, that way, my risk remains at 0.5% as I aim for my ultimate profit target at 1.6520.

Okay, that’s my trade idea folks. Feel free to hit me up on Twitter (@Loonieadventure), Facebook, or here. I try to read all of your comments as long as I have time. Toodles!

6 comments

  1. Cel

    Hi!

    I just want to know after all this month which is the
    balance of all your trades.  Are you a profitable currency trader? Are you doing this
    full time?

    Thank you… And good luck with your trading!

    Reply
    • Hucklekiwi Piphuck Post author

      While this month has not been kind to me, year to date I am in the green! I am up by 2.5% in my account. I don’t trade full-time though, as I have a day job!

      Thank you Cel!

      Reply
    • Hucklekiwi Piphuck Post author

      Good job Jasoya_FX. I should’ve immediately closed my position on the bad news! I hoped too much. :(

      Reply
  2. Erik Stenlund

    Did not work out although it was a good setup. Luckily I was short thanks to “chart of the art – june 14th”. Hope it will continue down to my goal.

    Reply

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