Pick of the Day: GBP/USD – Trade Closed

Trade Closed: 2007-04-18 02:00

Cable continued to rally and hit pt1 at 2.0100 for +50 pips on half position.

Trade Update: 2007-04-17 09:40

US CPI data came out almost inline with headline at 0.6% and core at 0.1%. While these numbers are good for the Greenback, they do not outweigh the interest rate outlook on the other major currencies, so we saw a broad dollar sell off. Our trade was triggered long at 2.0050 and reached a high of about 2.0077 before retracing back to around the current level of 2.0040.

So, will the pair hold above 2.000? Well, let’s keep in mind that we haven’t seen this level since about the time George Soros “broke the Bank of England.” This means that we haven’t seen this in a REALLY long time, and we don’t know what will happen, but fundamentals are supporting further rate hikes in the UK.

I will continue to hold on to this trade, probably into the rest of the week, depending on the market. Stay tuned for updates. Good luck!

Trade Idea: 2007-04-17 08:05

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UK PPI data came out rock solid this morning, solidifying traders outlook on more interest rate hikes. Cable busted through the 2.00 level, but will it hold? Well, with housing inflation and now PPI coming out stronger than expected I think it will. But, with US CPI coming out in a few minutes we will hold off jumping in for a few moments and we may possibly see a better price to enter.

Using the Fibonacci tool, we can see that the 38% Fib area should be a good place to enter if US CPI data comes out stronger than expected. The dollar will rally of course, but I think we will see the Cable rally soon after. Now if the core number comes out way stronger than expected, more than 0.3%, then we may have to change our short term outlook really quick. Stay tuned after the numbers.

For now, I’m long biased on this pair, so here’s a couple of ideas.

Long half position GBP/USD at 1.9985, stop at 1.9940, pt at 2.0050

Long half postion GBP/USD at 2.0050, stop at 2.0010, pt at 2.0100

Please remember to never risk more that 1% of your account on any single trade, so please adjust your position sizes accordingly.

Good luck and good trading!