Trade Closed: 2010-06-24 4:15 pm ET
It looks like I couldn’t catch a break on this trade as it seem traders took the proposed austerity measures in the UK as a good sign to buy up British Pounds.
Even with proposed tax hikes, government spending cuts, and hopes of the private sector stepping up to the plate, traders saw this as a turn for the better rather than focusing on the slowdown in growth these measures may bring. My friend Forexgump covered the budget statement in his blog post, so be sure to check it out!
So, as we can see in the chart above, Cable trended higher up to the psychological level of 1.5000, and stopping me out along the way….doh!
Total: -200 pips/ -1.0% loss
It was a good trade setup, but I probably should have been a bit more patient in my entry. I’m still bearish oh Cable, especially as I think risk sentiment will come back to the markets as we are seeing global equities taking a hit. Economic data isn’t looking to strong as well with housing in the US taking a dive on new home sales, and the jobs picture still looking weak.
I will continue to watch this area, but my young Forex padawan, Huck, thinks it’s time to jump back into Cable. She’s had a some good luck in her first year of trading, so be sure to check out her blog post to see what she’s up to! Good luck and good trading!
Trade Idea: 2010-6-22 1:43 am ET
On the daily chart, there are quite a few technical setups lining up for a position to go short. By just looking at the chart above, we can see the pair has been on a downtrend since November after if failed to break above the 1.70 area, currently trading around 1.4700. Next we can see that stochastics are indicating that the bounce higher, from a low around 1.4230 to 1.4800 is a bit overbought, and the pair may be ready to turn back into the down trend. Third, the pair tested major “support-turned-resistance” around 1.4800 area, which happens to be in the 38% – 50% Fibonacci retracement area. Last, but not least, I see a “rising wedge” pattern, which indicates a potential bearish move lower as buyers are unable to push out sellers around the 1.4800 area. It’s all lining up technically, will the sellers be ready to jump back soon?
Fundamentally, Pip Diddy pointed out in his Daily Economic Roundup that today’s budget release could show that the UK will implement austerity plans that could involve 80% in spending cuts and 20% in hikes… yikes! That may slow the economy down and bring the UK into the feared “double dip” recession scenario. This is a pretty big deal for the short term future, but we won’t know the outcome until we see the annual budget release is today at 11:30 am GMT.
In the US, we’ve got the existing home sales in today’s Forex calendar, and after seeing weak housing starts data, I think existing home sales may not fair much better after the end of the $8,000 home buyers tax credit. I think this event could bring about a round of short-term risk aversion, and potentially a drop in Cable.
So, it looks like the fundies are lining up with the technicals for now which makes me wanna short this bad boy! I will go short here at market (1.4730) as Cable is already breaking below yesterday’s lows, and my stop will be over the daily average true range of 175 pips to give the trade breathing room. My target is over 400 pips away at 1.4230, just above recent lows on the daily.
Short GBPUSD at market (1.4730), stop at 1.4930, pt at 1.4330
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
So, a nice 2:1 trade to hopefully end the month of June nicely. Thanks for checking out my blog and stay tuned for updates and adjustments!