Today’s dovish comments from the BOE has sent Sterling tumbling, and with my position up over 100 pips, it’s time to adjust my forex stop.
Original Trade Idea: Forex Trade Idea: GBP/USD Pullback in Downtrend?
Since entering short at 1.5200 last week, Cable continued to make moves higher and eventually test the 61% Fibonacci retracement area, which is also a major psychological level of 1.5300. Fortunately for my position, that’s where the rally ended as forex traders turned bearish on Sterling, especially after today’s Bank of England’s inflation report hearings where BOE Governor Carney implies that interest rates in the U.K. will remain low `for some time.’ The British pound sold off strongly on the event, pushing GBP/USD to break the 1.5100 level and test the 1.5050 minor support area. With the market moving my way, I thought it would be time to create a “risk-free” trade, so I adjusted my stop to breakeven at 1.5200.
I’m pretty confident that the market will get down to my 1.5000 target, especially if US quarterly GDP data comes in better-than-expected, but I wanted to give the trade room to breathe. So I didn’t lock in profits by trailing my stop lower…Is that the right adjustment? I don’t know but it’s up to the market from here and I’ll just have to wait and see. Stay tuned!