Trade Idea: 2011-10-5 23:57
Looking at the charts we see that GBP/USD is just chillin’ like ice cream fillin’ around the 38.2% Fibonacci level. With the amount of important economic reports coming out, my plan is to jump in when a breakout happens.
This means that I will buy the pair if we see a break of 1.5500 OR sell it once it goes below 1.5400. I plan to put my stop at 1.5400 if I go long, or 1.5500 if I short.
But of course, I won’t pull the trigger unless candlesticks materialize around the resistance/support areas. As always, I already have my candlestick cheat sheet ready right beside me.
I have to admit that I’m a bit short-biased on the pair though. So in case we don’t see a break at the top of the range (dojis form around the previous day’s high), I’ll probably short the pair right then and there.
As I mentioned, there are a few high profile economic reports coming. Namely, we’ll see the Bank of England (BOE) announce their decision on interest rates today and the non-farm payrolls (NFP) tomorrow.
It is widely expected that the BOE would hold rates at 0.50% and NOT expand its quantitative easing program but given the overall risk averse and pessimistic economic environment, I think we may hear some pretty bearish remarks from the bank. This may stoke speculation that the BOE would expand its QE program in the future.
As for the NFP, the market is expecting a positive number. But after showing no gain in the last month, how optimistic can the market get? At the end of the day, the global economy is still pretty weak. That being said, we may see risk aversion rear its head again in the market no matter what the actual figure is.
To recap, here’s my plan:
- If it breaks out strongly to the upside, I will buy at 1.5500 and place the stop at 1.5400.
- If it breaks out to the downside, I will sell at 1.5400 and place the stop at 1.5500.
- If resistance at the top of the range holds, I will sell around 1.5490 with stop at 1.5550.
- Profit targets are yet to be determined.
Alright, that’s my trade idea. I hope I can continue my winning streak.