GBP/USD: Potential Straddle Play

Trade Idea 2011-3-30 2:00

GBP/USD 1-hour Chart

I found this beautiful setup on Cable but I don’t know which side to take! Oh my gosh! I feel like I have to choose which is the better lipstick between MAC Ruby Woo and NYC Red Flame! So I’m just gonna let the market decide and save myself the headache.

Let me tell you my dilemma. (Don’t worry, I’m not gonna talk about my lipstick problem!) On the economic front, there are too many event risks listed on this week calendar.

For example, we’ll have Nationwide‘s report on house prices for March due tomorrow, and the manufacturing PMI scheduled on Friday.

I’m not really confident in rooting for the pound with ahead of these top-tier reports. I don’t think traders will give the U.K. the benefit of the doubt anymore, not after Chancellor of the Exchequer George Osborne’s not-so-impressive budget plan.

On the other side of the Atlantic, we have the much-awaited NFP report also coming out on Friday. It seems to me that rising commodity prices and inflation have become old news for the market. Now it looks like the spotlight is back to the U.S. after the string of comments about QE2 that we’ve heard from the Fed. And so, I think the employment figures will launch an extra load of fireworks and I may get burned if I’m not careful!

Because I believe the data could lead to a really strong breakout, I’m just going to ride the wave wherever it may go! Yup! I’m gonna pull off a straddle play. I’m planning to put two orders, one above the resistance (1.6040) and the other below support (1.5940). I believe that once price breaks those levels, the move will continue further.

My ultimate profit target is 100 pips, similar to the size of the range, but I may add to my position midway if the move is strong and fast. Because this is a breakout play, I’ll probably put a relatively tight stop of 50 pips. In any case, I’m going to update you all immediately once I actually take the trade! Stay tuned and follow me on Twitter!