GBP/USD: Selling on a Retracement

Trade Idea: 2011-9-7 00:35

GBP/USD 1-Hour Chart

As you can see from GBP/USD‘s hourly chart, the pair found a bottom around the 1.5950 area. It seems to me that the pair is currently climbing ever-so-slowly up as traders take profit. I think this is the perfect opportunity for us late sellers to jump in on the trend at a good price!

Since I believe the pair still has room to retrace, I’m looking to short at the 50% Fibonacci retracement level IF I spot some reversal candles. These reversal candles can come in many forms, so I’ll just refer ya guys to the School of Pipsology candlestick cheat sheet.

As for the fundamentals, I noticed that there are a few potential catalysts on tap from the U.K. today listed in our forex calendar. Halifax HPI, manufacturing production, and industrial production reports are scheduled to be released later. I don’t mean to sound pessimistic, but with the recent roster of negative economic data we’ve seen from the country, I doubt that these reports would fuel the pound’s rally.

Also, with talks about a possible credit downgrade for Italy, I’m anticipating risk aversion rear its ugly head back into the market and send higher-yielding currencies lower.

Now to recap, here’s my plan:

I will sell GBP/USD when reversal candlesticks materialize around at 1.6050 area and aim for former lows around at 1.5950. As for my stop, I’ll place it above the 61.8% Fibonacci retracement level and the 1.6100 major psychological handle.

There ya go, that’s my trade idea for today. Care to share yours too?

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