Trade idea: 2012-4-19 00:22
Price action on GBP/USD has virtually been the same for the past couple of days. The pair pulls back a little bit, falling 30 to 40 pips from its opening price, before trading higher. In fact, if you connect its recent lows, you’ll have yourself a rising trend line. And since I have a strong feeling that GBP/USD will continue trending higher, I’m going long!
I’m expecting a repeat of yesterday’s and Tuesday’s price action, so I won’t jump in at market. I’ll wait for the pair to pullback first and test support around the rising trend line between 1.5990-1.6000. If I get triggered, I’ll place my stop at 1.5950 and aim for 1.6100. This gives me a respectable 2:1 reward-to-risk ratio. Not bad, eh?
Of course, I can’t forget the fundamentals. Yesterday, the BOE’s meeting minutes revealed that one of the two members that were calling for an increase in the asset purchase program switched sides. He’s now part of the majority who thinks that the current program is sufficient.
In addition, the country’s employment report came in much better than expected. The Claimant Count Change showed that only an additional 3,600 people claimed for unemployment insurance in March instead of 6,600. Meanwhile, the unemployment rate fell to 8.3% from 8.4%.
No major news report today from the U.K., but there are some in the U.S. Namely, we’ll be seeing the initial jobless claims, existing home sales, and the Philly Fed manufacturing index. These news reports could give GBP/USD the volatility it needs to trigger my buy limit order.
Buy GBP/USD around 1.5990-1.6000, stop loss at 1.5950, and profit target at 1.6100. I’ll risk 1% of my account on this. Risk disclosure.