I may have left some pips on the table with my previous Cable short, but I’m convinced that the downtrend could resume at some point. Here’s the pullback play I’m looking at.
The pair is already pulling up to the 38.2% Fibonacci retracement level, which is near a former support area visible on the 1-hour time frame. Stronger than expected U.K. headline CPI and underlying inflation figures boosted sterling yesterday and I’m expecting additional volatility from today’s employment reports.
Because of that, I’m watching a slightly higher sell area around the 50% Fib and 1.3100 major psychological level. Stochastic is already indicating overbought conditions but the oscillator hasn’t turned down from the area yet, which suggests that bulls might still have enough energy for a slight push higher.
I haven’t set actual orders yet since I plan on waiting for the U.K. jobs figures to come out before deciding where I want to short. Keep in mind that the FOMC minutes are also up for release today, which could mean even more crazy moves for dollar pairs like this. Still, if more FOMC members share the same view as Dudley and Lockhart, the Greenback could be poised for more upside on rate hike expectations.
If I’m able to enter around those Fib levels, I’ll place my stop past the swing high and aim for the previous lows initially. 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.