Long GBP/USD on a Pullback – Closed Orders

Closed Orders: 2013-12-18 13:46 ET

It looks like Cable rallied higher without me after finding a bottom this week at 1.6220 and positive UK jobs data. With the Fed decision coming up in minutes, I’ve decided to close out my open orders.

GBP/USD forex chart review

GBP/USD forex chart review

The chart above says it all.  A nice rally today thanks to a positive surprise in the UK jobs data: unemployment falls to 7.4% from 7.6% and claims decrease to -36.7k from the forecast of -35k.  And as I previously mentioned we’ve got the Fed coming up on the much anticipated decision of “to Taper, or not to Taper.” If they do Taper, the probability is high that the Greenback would rally, which means I don’t want to go short USD at 1.6200.  And if they don’t Taper, well, I already missed the rally.  So, I decided to close out my open orders at 1.6200 to watch and re-assess.  No trade.

Of course in hindsight, I probably should have just entered a small position at market, but with so much major events coming around, experience tells me to be a bit more cautious.  Next time I probably will go in at market, but with a smaller decision.

That’s it for me today.  Again, I’ll watch what happens today, and maybe come up with another trade idea if an opportunity arises.  Stay tuned!

Trade Idea: 2013-12-17 11:54 ET

Finally got a decent pullback in the strong Cable trend higher that goes back to the beginning of November. Is this an opportunity to get on the longer-term rally at a better price?

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 4 hour forex chart

GBP/USD 4 hour forex chart

My catalyst for this trade is the FOMC monetary policy statement tomorrow. They started their meeting today, and tomorrow afternoon, they’ll let the world know whether or not we’ll see a reduction in their bond purchase program. And even though US data has been better, it’s still not great. I’m in the camp that thinks we won’t see a Taper tomorrow with the possibility of forward guidance for a Taper, and that the Dollar may feel a bit of pressure on the event. If I’m right, there’s a pretty decent R:R setup going on now technically, and if I’m wrong, well…that’s what stops are for.

In the 4 hour chart above, we can see the pair has pulled back to the broken resistance area around 1.6250–is it now support? It’s the first touch of the area, so I’ll be a bit conservative by waiting for the market to hit a major psychological level before entering. My stop will be wide, about one-half WATR, and my target will be the swing highs. Here’s what I am going to do:

Long half position GBP/USD at 1.6200, stop at 1.6100, profit target at 1.6450

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 2.5:1. 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!

  • emmanuelamu

    this is nice

    • Pipcrawler

      Thanks emmanuel! What do you like about my blog, or what can I do better? :)

  • FxSniper

    Went all the way towards round number in earlier sessions but missed my ideal limit order by 5 pips! But h4 still has a valid handle to join, so I finally joined GBPUSD at 1.6280 with stop at 1.6210 and Target 1.6750 with possible extension to 1.7030 by end of year. Really nice idea

    • Pipcrawler

      Yeah, missed my entry by about 15 – 20 pips…doh! I’m only looking at short-term plays for now since we’re about to hit the holidays, but I wish you luck on your 1.6750 target!

  • Christopha

    Caught up late but still made some decent pips.
    Thanks

    • Pipcrawler

      Congrats…I’m happy to share! Where did you get in and out? I’m always curious to hear how others enter when the entry isn’t always a perfect/late one.

  • http://www.spaceonlinejobs.com/ Abdul Rehman

    it was great call i missid it:( , actualy i was wating of 1.6150 level my target was same

    • Pipcrawler

      Great calls don’t make pips on their own! hehe …I gotta keep working on my execution my friend. Don’t worry, there’s always an opportunity to catch pips in forex almost every day Abdul. Stay motivated!

  • ForExchange

    Very nich analysis! It is really a pitty for our pips that the currency did not reach the needed 1,6200. What was actually the overall movement of pips on that day? Do you have a favorite currency Pair, Pipcrawler? Waiting for the next analysis

    • Pipcrawler

      From the low of 1.6220, it was a max move to about 1.6480, or 260 pips…doh! I don’t really have a favorite currency pair; I kinda just try to play the pairs that I think will move for the day/week.

  • FxSniper

    I just added my second position on this pair at 1.6370. Will be exiting at 1.6610 on that one. My overall target remains 1.6750-1.7030

    • Pipcrawler

      Nice, but it looks like the pair found sellers at last week’s high around 1.6460. The market’s below your second position entry; where is your stop at FxSniper?

      • FxSniper

        I had my stops at first entry but after today’s close, my stops are now below h4 double candles formation just at 1.6329. I will be adjusting as I see fit and will close if I see a clear reason to

  • FxSniper

    I also longed AUDUSD at 0.8828. This one is clearly a dangerous, though in my view, sensible long operation. I will be targeting 0.9130 on that from where, I will go very short on that pair! I have a 45 pip stop on this one.

    • Pipcrawler

      Gutsy play, especially since the big players are probably gonna start buying Greenbacks long-term (at least while more Taper is expected). But big R:R potential with that tight stop. Good luck and trade safe :)

      • FxSniper

        Yes, it is going ok for now and I am sure I will be able to risk zero on this pair. I got in at a very good price and have brought my stop to Break after today’s close. So I am safe on this play and will be exiting when I see fit. I like 0.9000 or just before it then I will watch. I believe this is time to expect a gap up over the weekend on this pair.

      • FxSniper

        I am restoring my eurusd long too at 1.3640 and this time, I am going for 1.4250, which I believe should be our year end high. My risk is 1.3511 but of course I am responsible for cutting it short if I see that it is not working. Dojiing currently on h4 is a way to go baby! I need more of those before the hit.

  • ForExchange

    FxSniper,

    because of which reasons do you think of a bullish tendency on GBP/USD?

    • FxSniper

      Because the pair has been and continues to be in a very strong bullish trend. The surge earlier off 1.6200 area represents the latest bullish swing and pair should be bought on retraces going forward until that low goes under. Your h4 should show you a break of bearish retracement trendline with the earlier surge. 1.6336 is your latest intraday bottom and you should seek to align your interests with that bottom until broken. Everything points to the topside on the pair from where I am sitting.

      • Pipcrawler

        To answer your first question of why I’m bullish GBP…it’s for fundamental reasons. It’s been printing better data over the last 6 months, plus they’re in position to reduce QE as well if they want to (they won’t for now). The UK is also a safe place to park your assets, especially relative to the stories from the other major economies, so I think capital will continue to flow there as long as the story stays positive. Usually, I’m not really bullish/bearish on a market on technicals alone as I don’t believe it’s what drives a market; I just use it as a framework to execute my biases and ideas.

    • FxSniper

      The pair is still maintaining the bottom we mentioned last night and so long as it remains atop it, I will maintain my long

  • Chuka Madu

    I got bounced out of gbpusd but back in at 1.6330

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