GBP/USD: Riding the Falling Channel

Trade Idea: 2012-5-10 1:54

GBP/USD Chart

I fell head over heels for this setup on GBP/USD almost as soon as I saw it on Big Pippin’s Daily Chart Art. Doesn’t that descending channel look oh-so sexy?!? I’m not gonna go gaga in selling the pound just yet though, as I think it still has some room to go higher.

The pair has been rejected at the falling trend line a few times since last week. I’m expecting price to test it once again today so I placed a sell order around the area at 1.6150.

As for my stop, I put it well above the trend line at 1.6215 to take account any unexpected volatility that may come with today’s potential market-movers. I’m going to take profit at the bottom of the channel at 1.6030.

Fundamentally, I’m also bearish. For one, the U.K. has slipped into a recession again. The U.K.’s economy was reported to have shrunk by 0.2% for the first quarter of 201. In addition, the euro zone’s debt problems have flared up again with Greece and Spain on the spotlight.

I think the success (or failure) of my trade will depend largely on how the Bank of England (BOE)‘s interest rate decision will go later. The market widely expects the central bank to keep rates unchanged and implement no additional quantitative easing.

How the accompanying statement will go, however, is still up in the air. I think they’re going to be bearish though, given all the risks present in the global economy.

To recap, here’s my game plan:

Short GBP/USD at 1.6150, stop loss at 1.6215, profit target at 1.6030, 1% risk. Risk disclosure.

XOXO,

Huck

Follow me on MeetPips.com
Follow me on Twitter
Like my page on Facebook

  • Sally Farmer

    It looks like Katla volcano is imminently ready to blow in Iceland, that will be bearish for the whole of Europe. 
    http://www.katla-volcano.co.uk…  I hope it does not but I agree with Huck, looking like a bear is the better side of the trade at the moment.

  • Leon Menezes

    i have made a sell today at 1.61635 europe is is big trouble and UK is been Hit as well lets hope things go bearish 

  • Leon Menezes

    i feel next week but so far im on positive so hey think thats a good move already

  • ML

    When do you think the market will hit your target profit?