Trading the Downtrend on GBP/USD

Trade Idea: 2011-11-3 2:09

I know Halloween is already over, but I hope I get a treat from the market with this sexy setup I spotted on Cable!

GBP/USD Hourly Chart

The pair has been making lower highs for the past couple of days, forming a falling trend line. I think that sellers still have the upper hand in the market so I plan on jumping in on the trend when the pair pulls back to the 61.8% Fibonacci retracement level. If you’ve noticed, the area around 1.5980 coincides with the trend line. Sweet, eh?

My fundamental reasoning is pretty simple. Even though euro zone financial officials have agreed on a bailout plan, there is still a lot of uncertainty surrounding euro zone’s future.

In fact, just a few days ago, Greek Prime Minister Papandreou spooked the markets when decided to hold a referendum on the EU loan package. It triggered a wide-reaching case of risk aversion that resulted in a huge Cable sell-off. I think this will continue today, especially with the G20 summit and U.S. non-farm payrolls coming up.

There are a couple of important economic reports due today but I think the main event to watch out for is the speech by BOE Governor Mervyn King. In the past, his speeches tend to have a negative effect on Cable, so I’m thinking the same will happen later.

Based on my technical and fundamental biases, I’m going to short Cable. Here’s my plan:

Short GBP/USD at 1.5980, SL above the most recent high at 1.6050, PT 1 around the swing low at 1.5900, PT 2 yet to be determined.

I’m feeling good about this trade idea. I hope it works out.



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  • Fahiz62

    Am also following this trade… fingers crossed

    • huck

      My only concern is if price will head that high!

      • Virtuous Carl

        i guess price is going up that high

  • Dimitri Power

    Daily chart also showing down trend, brake of recent lows = big move down.

  • Jānis Pusplatais

    Good luck!

  • Schnitzel

    good trade idea, but the support level at around 1.5890 should be hard to break.. I’m also concerned that traders will not follow that fundamental data, especially the US data, since the FED already gave a quite positiv outlook to the US economy yesterday..

    but i have a sell stop @ 1.5870 if it breaks through

  • forexnoob

    perhaps we should wait and see if there any breakout or no at 1.6042..not sure about this too..what do you guys think?

  • Pricehcm

    My system is based on cycles and trends.. I absolutely don’t believe in the news making the price, rather its the opposite. There are short term cycles and trends and, also long term cycles & trends. My short term trades tend to stay a few days and the long term trades about a month or so. Based on this my system identifies the trend of any pair, gold,silver, crude, futures etc.. subscribe to my blog by adding your email at the bottom of the page. Blog will be updated every other day, Since there is no need of listening to market noise every second.

  • Beldean Ciprian

    looking good…i think, ECB cutted rates + Greeks on brink … looks down again…