With forex sentiment shifting big time on the Greenback, it was time to adjust by locking profits on my GBP/USD short & setting up for a USD/CAD long.
Original Trade Idea: Forex Trade Updates: GBP/USD Long
Last Friday, I caught a whole lot of luck thanks to the positive surprise to the October U.S. employment data. With the U.S. printing a huge upside number, the market is convinced we’ll see a Fed rate hike in December, which of course boosted the Buck big time after the data release. After my stop-and-reverse move on Cable, this pushed my total pips in to the positive as the market closed in on 1.5000.
The market is currently bouncing higher from lows around 1.5027 and with significant economic events on the forex calendar this week, I’ve decided to roll my stop down to 1.5146 to lock in a profit.
We’ll probably see another significant move this week from the U.K. unemployment data, which is coming this Wednesday at 10:30 am GMT.
In case there is a pullback on recent USD strength, I’m looking to go long more Greenbacks against the Loonie, playing the idea that the renewed fears on global growth will force currency traders to go into risk aversion mode. We’re already seeing this dynamic start to play out in equity markets, so it may not be too long before forex players follow suit by selling high-yielders and moving into safe havens like the U.S. dollar and Japanese yen.
Technically, 1.3200 looks like an area of previous interest that held as support recently and now may potentially serve as support. I’ll look to go long there if there is a pullback, with a half weekly ATR stop and targeting the recent swing high. Here’s what I’m doing:
Long half position USD/CAD at 1.3200, stop at 1.3075, max profit target at 1.3450
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 2:1. Of course, anything can happen in the forex markets (and we do have a busy forex calendar this week), 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!