GBP/USD: Waiting for a Downside Break

Trade Idea 2012-6-14 02:00

GBP/USD 1-Hour Chart

I see that an ascending triangle has formed on the hourly chart of Cable. This pattern is normally considered bullish, but not all the time. Given the current market environment and the overall long-term trend, I think it’s actually going to break to the downside!

I’m not going to jump the gun and sell at market though. That’s just silly and reckless! What I’m going to do is sell only when price actually closes below the 1.5500 major psychological level and the rising trend line.

I’m ultimately aiming for 1.5300, which is roughly equal to the height of the triangle. But since the target is very far, I may take half of my position off at 1.5400. For now, I’m eyeing the 1.5550 minor psychological handle as my stop loss. That can still change though, depending on how high the pair pulls back before falling. Wherever the pullback stalls, I will set my stop a little above it.

Fundamentally, there are talks going around the markets that the BOE could soon ease monetary policy even further. A report from the Financial Times said that insiders in the central bank could launch more stimulus measures to provide the economy with more liquidity. Yikes! If the rumors are true, I’ll be ready to get in on the pound’s slide.

If not, well, there’s always risk aversion. The European debt crisis continue to dominate headlines with concerns mounting about Spain’s bailout, rising bond yields in Italy, and Greece’s upcoming elections. I won’t be surprised if we hear more bad news from the region that would consequently send the pound, along with other higher-yielding currencies, down the charts.

To recap, my plan is to:

Sell GBP/USD around 1.5500, SL at 1.5550, PT1 1.5400, PT2 1.5300. 1% risk. (Risk disclosure.)

There ya go! What do you think of my trade? Hit me up with your comments!

Much love,

Huck

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  • huck

    Shorted earlier at 1.5480 when price broke past support at the rising trend line. I left my stop at 1.5550. I’ll keep you posted!

  • Sharp Suit

    Also comparing the price movement to the Stochastic indicator on the 1hr time frame we can see an indication of Hidden Bullish Divergence, as described in your most fantastic School of Pipsology!

    (
    http://www.babypips.com/school

    • Sharp Suit

      Sorry I mean Bearish* Divergence!!!

  • Sharp Suit

    I agree here also. If you look at the ascending triangle that had formed on the GBP/JPY you’ll see that it broke through bearish last night. I can see that the same will happen on this pair.

    • huck

      You’re right! Just saw GBP/JPY now.

      • Sun-shine

        You are great HP

  • Granticus_Maximus

    I totally agree with you here. Though we’ve seen recent bullish strength bring the majors back up, I reckon they’re going to start heading back down soon. With all the negativity around I can’t help but be bearish (no matter what the technicals say). Just have to wait for the right time to enter like you said! :)

    • huck

      Thank you!

    • Matt

       I agree with you as well, Im just waiting for the timing to continue the downtrend in the Euro, more downgrades happened, and there has been a string of poor data lately worldwide, its just a matter of time until the euro tanks again to the 1.20 level and then 1.18. Im just waiting for the right time. Goodluck :)

      • huck

        Thank you! 

  • keysie

    What happened?…