Sterling has had a rough start to 2016 and I finally may be seeing an opportunity to short some with GBP/CHF on a trend pullback. What do you think?
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Got a mainly technical trade opportunity on GBP/CHF as the pair is finally pulling back from a downtrend that’s been going since finding major resistance mid-November 2015. It’s gotten high enough to breach the 38% Fibonacci retracement level, which means forex traders could start to take notice and see it as a chance to short broad British pound weakness at better prices.
I also like going short Sterling this week as we head into a plethora of potentially volatile economic U.K. events on the forex calendar, namely the BOE Inflation Report and monetary policy meeting this Thursday. With growth concerns and inflation still weak across the globe, it’s likely we’ll get some dovish commentary from the Bank of England, similar to what we’ve seen from other central banks in the past couple of weeks.
Similar to my most recent trades, I’m going to scale in starting at market and up to the 61% for my top entry, and my max stop will be will above the Fibonacci retracement area. My max target will be the major psychological level just below the recent swing low for a very nice potential return-on-risk. Here’s what I’m doing:
Short GBP/CHF quarter position at market (1.4709), max stop at 1.5075, max profit target at 1.4000
Short GBP/CHF quarter position at 1.4950, max stop at 1.5075, max profit target at 1.4000
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 4.76:1 if both positions are triggered. Of course, anything can happen in the forex markets, 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!