Cable is finally seeing some action after comments from the BOE today, prompting me to shift my bias to the downside and executing a stop-&-reverse adjustment.
Original Trade Idea: Forex Trade Updates: GBP/USD Long
Yesterday, FOMC Chair Janet Yellen’s hawkish comments that they expected the U.S. economy to generate further improvements, essentially leaving the December rate hike open, and today we got commentary from the Bank of England suggesting that not only could interest rates stay low for longer, but that a cut in interest rates is not out of the question. With these events essentially changing the story a bit in favor of Cable bears, I decided to adjust my long GBP/USD position, which opened not too long at 1.5300 after this morning’s BOE events.
To me, I think this bearish sentiment will be here for a while so I decided to close my GBP/USD long and short a half position at 1.5246 for an initial loss of -46 pips (-0.09%). My new stop is 1.5520 and my max target is the major support area highlighted in the chart above at 1.4700.
Both trades combined, my max loss is 0.59% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.99:1 or 0.91%. Of course, anything can happen in the forex markets, including tomorrow’s U.S. Non-Farm Payrolls report, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!