Trade Closed: 11-10-18 23:13
After I had jumped in at market at 1.5820, I saw GBP/USD make its initial descent in the charts on the heels of worse-than-expected economic reports from China. Then, it seemed like the positive CPI report from the U.K. only fueled the bears’ rally even more during the London session.
I know that higher inflation is usually bullish for the pair, but I guess I was right in thinking that the market wasn’t expecting a rate hike from the Bank of England (BOE) after it had already announced that it would implement further easing.
Yay! You betcha I’m a pretty happy girl right now! I hope you guys were able to make pips on the move too.
Trade Idea: 2011-10-18 1:38:02
Isn’t that a beauty?
The pair, after several days of rising, finally found resistance. It formed a nice bearish engulfing candle right at 38.2% Fibonacci retracement level and previously broken support area, indicating that the bears are starting to fight back. The overbought Stochastic also gives me additional confirmation to go short.
I then relied on the one-hour chart for my entry. As you can see, price has found significant resistance at the 1.5850 level. I’m thinking price has finally topped out and has nowhere to go but down. The Stochastic on this time frame is also overbought.
I’m hoping that risk aversion would remain to be the dominant theme in today’s trading. Yesterday we saw higher-yielding currencies get sold off when German officials tempered down expectations for the EU Summit this weekend, hinting that policymakers may not have any concrete plan to address the debt crisis. I’m pretty sure that a lot of investors are still upset over the news and perhaps the worse-than-expected GDP report from China would give them one more reason to flock into the safety of the dollar.
Yeah, I know that the consensus is for the report to come in higher at 4.9% for September from August’s 4.5% reading. However, I think the effect of a better-than-expected inflation report will be limited. If you’ve read Forex Gump‘s article on the BOE before, you probably know that the central bank already pulled the trigger in providing the economy with more liquidity. I don’t think BOE Governor King would take back what he said during the bank’s most recent interest rate decision based on one month’s worth of data on inflation.
So based on my technical and fundamental view on the pair, I have decided to short. Here’s what I’m going to do:
Short at market (1.5820), stop loss at 1.5900, profit target yet to be determined. As usual, I will risk 1% of my account.
Gosh, I hope my trade works out! Wish me luck!