Trade Closed: 2011-11-27 22:35
I didn’t think I would get the best Black Friday bargain from the forex market with a win on my GBP/USD trade. 110 pips baby!
As it turns out, the setup I pointed out last week was indeed a bearish flag. The pair broke down below the area of consolidation as risk aversion just continued to take its toll on higher-yielding currencies which includes the pound.
Aside from the bearish tone of the BOE minutes, the weak turnout of the German bond auction also helped spur the dollar’s rally.
I decided to take profit at 1.5470 just before the week ended because I didn’t want to worry about my trade while I shopped. Whoo! I hope I get to bag another winner this week too!
Closed at 1.5470: +110 pips / 1.10%
Trade Idea: 2011-11-23 1:52:39
I guess it’s true what they say about beauty being in the eye of the beholder. While Big Pippin sees a bullish setup on GBP/USD, I see a bearish one!
In today’s daily chart art, Big Pippin points out a possible Fibonacci retracement play on the daily chart of Cable.
However, I zoomed in on the 4-hour chart and noticed that the pair is actually sporting what looks like a bearish flag! So I thought to myself, maybe it would be a good idea to short the pair when it strongly closes below yesterday’s low around 1.5580.
After all, it seems like there hasn’t been any changes in the fundamentals which indicate that a reversal would soon happen.
Fundamentally speaking, the situation hasn’t changed. Risk aversion is still at high levels, especially now with the European Union demanding Greek public officials to make a pledge that they would implement the new austerity measures that both of them agreed in the past.
For the U.K., the prospect of stagflation is still present. The most recent CPI report came in at 5.0% and the preliminary GDP only showed a 0.5% growth. The upcoming MPC meting minutes at 9:30 pm GMT later could also show the central bank’s bearishness towards the economy which would push the pair down again.
Now here’s how I plan to trade GBP/USD:
Short below 1.5580, stop loss above yesterday’s high at 1.5700, profit target to be determined.