Trade Idea: 2012-1-12 00:40
To make up for my failed trade idea last week, I decided to come up with not one, but two ideas today!
The first one is a simple retracement play. As you can see, price broke through the 1.5370 level recently. And so, I’m thinking that GBP/USD could find major resistance around the area. Also note that the 38.2% Fibonacci retracement level coincides nicely with it. The confluence of those two lines give me confirmation that 1.5370 could be a good level to sell in the event that price heads there again.
The second one is a breakout trade. The pair, after experiencing a huge drop yesterday, is currently consolidating. This kind of formation is called a bearish flag. If price breaks down, I’ll jump in immediately and ride the move down. For this setup, I’m hoping to short a few pips below yesterday’s low.
Why so bearish, you ask?
Well, given that the pound got sold off yesterday following negative data from the U.K., I’m anticipating the same bearish price action on the pair if the manufacturing and industrial production reports fall short of market expectations.
I’ll also be keeping an ear out for the BOE interest rate decision. I know that no one is expecting the central bank to cut rates. However, given the disappointing reports we’ve seen from the U.K. recently (yesterday’s trade balance and BRC shop price index reports are only a couple of many), we might just hear dovish remarks from BOE Governor Mervyn King.
To recap, here are my plans:
Retracement: Sell GBP/USD at 1.5370, SL at 1.5420, PT to be determined
Breakout: Sell GBP/USD at 1.5305, SL at 1.5355, PT to be determined
Okay, those are my trade ideas. I’ll be sure to update you which one I take! Stay tuned!