Breakout Long on GBP/USD? – Closed

Trade Closed: 2013-11-20 22:00 ET

Both events that I anticipated didn’t play out as I expected, so I immediately closed my long GBP/USD trade after the release of US retail sales.  Here’s how today’s price action played out.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

GBP/USD forex trade review

GBP/USD forex trade review

It’s all laid out in the 15 minute chart of Cable posted above.  There was no buy spike after the BOE meeting minutes, probably due to the statement from the MPC that reaching a 7% unemployment rate did not mean that rates would automatically be increased.  In the US session, October’s retail sales comes out better than expected (0.4% vs. 0.1% forecast), sparking quick USD buying.  That was very short-lived as we saw a shift broad risk taking on that positive US retail sales data, leading traders to sell their greenbacks for other risk assets.

As soon as we got the positive US retail sales data, GBP/USD dropped on the news, and since the events I focused on for my trade didn’t play out as I expected, I closed my trade immediately at market (1.6130) for a very small loss.

Total: -20 pips/ -0.20% loss

This was an anticipation, breakout play and I don’t think I would have done anything differently; the market just didn’t play out to my expectations.  That’s just how it goes sometimes.

Thursday’s session has a lot of potential for movement with fresh speculation of the ECB possibly going negative on interest rates, so stay tuned for new market observations and ideas by following me on Twitter and Facebook!

Trade Idea: 2013-11-20 2:11 ET

Good morning forex friends!  I’m going with a swing long today on Cable as I think today’s events have a good chance in pushing the pair higher out of consolidation.

GBP/USD forex breakout

GBP/USD forex breakout

On the one hour chart above of GBP/USD, I highlighted the 1.6100 area as it looks like price is consolidating there at the moment. It looks like a simple breakout setting up, and I think today’s BOE meeting minutes has a good chance of bringing more positive flows to Sterling. The MPC held the key rate at 0.5% and maintained their asset purchasing program at 375B pounds at the last meeting, and with the unemployment rate seemingly on its way to 7%, the market is speculating an earlier increase in rates to late 2015 vs. early 2016.

I think US retail sales will also be a catalyst for a move higher in Cable as we’ve only seen better-than-expected results once in the last 6 months.  We also got a kicker for USD bearishness from Ben Bernanke earlier on his statement that he thinks interest rates will remain near zero for a “considerable time.”

So, I’m going to set orders to buy at the top of the consolidation range, with my stop a comfortable 50 pips away to give the trade breathing room; my target will be at the September and October highs, which could provide significant resistance. Here’s what I am doing:

Long half position GBP/USD at 1.6150, stop at 1.6100, profit target at 1.6250.

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2:1. I’ll be trailing my stop by 50 pips.

Of course, anything can happen in the world of currency trading, so if the story changes or unfolds differently than I expect, I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • alharosh

    Man, cheers to you. you absolutely right but I got but i get wrong. I will be glad if i can learn from you how to analyse the charts .


    • Pipcrawler

      Thanks but I think I was off on this one. I think my trading process was good, but the data and the market didn’t play out as per recent history.

      I appreciate the comments and I look to learn from you as well!

  • James

    I was waiting for the daily to close above 1.6150 before going long.. Now that did not happen, I’m looking to short this pair.

    • Pipcrawler

      Thanks for sharing James. Shorting might be a good idea if traders continue to think the Fed will Taper sooner than later. We’ll see… good luck!

  • Boksphet

    I shorted the pair at 1.5926 and I am aiming 1.5500 in the long run.