Trade Review: EUR/GBP Long-Term Trend Line

The numbers are in… and I’m out of this trade! Here are the reasons why I decided to exit this EUR/GBP position early.

Short EUR/GBP

In my initial trade idea, I’ve mentioned that I was looking at a long-term downtrend on EUR/GBP, mostly based on expectations that the ECB would take a very dovish stance in this week’s monetary policy statement. Of course that’s not how things turned out, as Doomsday Draghi seemed to be in a much better mood during the event.

I shorted EUR/GBP last week on a break of the head and shoulders neckline, thinking that it was the confirmation I needed for a short bias. Price pulled up to the broken neckline for a quick retest then resumed its slide but failed to break below the .8300 handle despite stronger-than-expected U.K. CPI and jobs data.

EUR/GBP 1-hour Forex Chart

EUR/GBP 1-hour Forex Chart

I probably should’ve closed a bit earlier when the U.K. retail sales missed expectations and showed a 0.9% slide but I was hoping to hear a few easing hints from the ECB then. By the time the U.K. printed a contraction for both the manufacturing and services sector PMIs, I finally decided it was time to jump ship. After all, these figures are for the month of July (post-Brexit vote) and are considered leading indicators, which means that they’re more likely to affect future pound action compared to the reports released earlier in the week.

With that, I ended up with a 50-pip loss on this trade or a tiny 0.07% dent on my account. As you’ve probably guessed, I’m keeping my GBP/USD short position open now that pound bears have more reason to push the currency lower.

As always, 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 simply follow what I do.

Risk Disclosure
Pipcrawler’s Q2 2016 Blog Trading Performance
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