Trade Closed: 2013-02-08 21:15 ET
Good evening! It looks like going with technicals for the Friday session didn’t pan out as Cable rallied higher on a sentiment shift of flows from the eurozone to the UK.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Without new news for the session, Cable moved higher on capital flows from Europe. It looks like I misjudged the impact of future BOE Governor Carney’s testimony. While the initial reaction was quickly faded, traders decided in Friday’s session that the UK was a better place for their capital than Europe after Carney stated that the current monetary policy in the UK would be enough (i.e., no additional stimulus). Take a look at a EUR/GBP chart and you can see a huge 200 pip drop (the biggest weekly gain for GBP since 2011) from Thursday to Friday, which provided broad based support of the Pound against all the major currencies.
So, what was a game changer for one pair, EUR/GBP, turned out to be a market mover for Cable. Needless to say, my day trade short was pushed higher and stopped out at 1.5777.
Total: -55 pips/ -0.25% loss
Overall, it was a good technical setup that I would play any day, but my interpretation of how Carney’s testimony was off. I thought the fade of it meant it was a non-event, but it just took traders a bit of time to price it in. And they did it big time in a market I don’t usually watch, which had an affect on my own position. Gotta keep that in mind for future trades.
I actually felt in tune with the market this week, up until the Carney event which ended up as a very small loss to my account. Thank goodness the weekend is here; time to relax, reflect, and get ready for next week. Thanks for checking out my blog everyone. Have a great weekend!
Trade Idea: 2013-02-08 02:45 ET
Good morning forex friends! With the forex calendar going dark for the UK and the US, technicals and sentiment may be today’s driver for Cable. Will we see sellers one last time before the weekend?
My guess is that we’ll see weakness for Cable going into the weekend. Incoming BOE Governer Mark Carney gave the currency a boost during his testimony to the Treasury Select Committee, we can see the markets quickly faded that, pushing the pair back to 1.57 where it’s consolidating at the moment. This tells me that sellers are in control for now, and with no changes from the MPC, and nothing hinting at increased monetary easing from Carney, I think sellers will stay in control for a bit. And with no UK or US news, technicals may play out in today’s session.
Technically, I’m looking to short in the Fibonacci retracement area as stochastics are showing overbought conditions on the one hour. If the big market players are thinking the same, we may see a push lower at the London open. So, I’ll be shorting now with tight stop and very small position (0.25% account risk). This is what I am doing:
Shorting quarter position of GBP/USD at market (1.5722), stop at 1.5777, profit target at 1.5635
With sentiment turning sour thanks to recent developments in Spain and Europe, I think broad sentiment could be in favor of the Greenback and give my trade a higher probability of success.
Of course, the market can change its mind on a dime, so if the story changes I’ll be sure to adapt quickly. Stay tuned for updates by following me on Twitter and Facebook. Thanks for checking out my blog…good luck and good trading!