Trade Closed: 2010-10 3:00 pm ET
It looks like I got the price action I was hoping for as Cable pulled back just enough to trigger half of my orders to go long. With the help of today’s announcement from the Bank of England on interest rates and their bond buying program, we got to see another retest of 1.6000.
Before the Bank of England’s Monetary Policy Committee kept interest rates at a record low and refrain from increasing their bond buying program, Cable dipped to the potential support area I marked on my earlier chart to trigger my orders at 1.5860. Dollar selling later resumed and with today’s announcement, Cable pushed above 1.6000 and my trade was closed. I closed my open orders at 1.5820.
Total: 140 pips/ +1.0% gain
Soon after the MPC announcement, we got a better than expected Initial Claims number from the US and the Greenback rallied across the board. Good thing I took profits there, right?
Overall a good trade and that will be the last one for the week as the weekend swiftly approaches with NFP ready to rock the markets. I think I’ll stay out of the way for now.
Thanks for checking out my blog and stay tuned next week for new ideas! Have a great weekend
Trade Idea: 2010-10-05 2:53 pm ET
Happy Tuesday to everyone! Cable made another push above the minor resistance level of 1.5870 and it looks like it’s holding. Is the rally now ready to continue?
On the chart, I marked 1.5870–a minor resistance area where Cable seems to have found a top last week, and pushed back strong attempts from the bulls to break out higher. After breaking above 1.5870 for the third time today, it seems that level has now turned into support and we saw Cable test last week’s high around 1.5923 before falling back. Because the pair is trending higher, if it falls back to the broken resistance and beyond, I look to go long to jump in the trend.
Market sentiment seems to continue to focus on potential quantitative easing (QE) from the Fed. And now, we are hearing the same rhetoric from other central banks as they try to keep their currencies weak for their exports to compete in the global markets. This is pushing risk tolerance back into the minds of traders as the play of the day and we see higher-yielding currencies, commodities and equities rallying against the Yen and the Greenback. We’re also seeing recent positive data from both the US and UK, sparking further risk tolerance as well.
So, I have sentiment and technical arguments to go long if there is a pullback. Tomorrow’s UK Halifax House Price data may bring weakness to Cable, but forecasted better than expected US ADP Employment and UK Manufacturing/Industrial production data may swing the bulls back into power.
If I do get a pullback–and stochastics are indicating we might–I will scale into a long position at the 38% and 61% Fib levels to give me an average entry price of around 1.5840. My stop will be below the rising trendline. I will target the major psychological level and summer high of 1.6000. Here’s what I am going to do:
Long half position GBPUSD at 1.5860, stop at 1.5770, pt at 1.6000
Long half position GBPUSD at 1.5820, stop at 1.5770, pt at 1.6000
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
We do have the Bank of England interest rate and QE decision. With the recent positive data, there are expectations that they will not change rates or increase their QE buying. Depending on how the market behaves, I may adjust my orders before then. Also, it’s NFP Friday this week and if I am still in a position before hand, I will definitely adjust before that set up volatility rocking data. Stay tuned!