Pick of the Day: GBPUSD – Trade Closed

Trade Closed: 2010-07-13 11:40 am ET

PoD Chart

As expected, UK CPI data brought in volatility to Cable, eventually pushing the pair higher to my entry level. Unfortunately, weak US data and and positive corporate earnings sparks a demand for “risk” at the beginning of the US trading session.

In my chart review above, we can see Cable rallied higher after prices in the UK came in at 3.2% vs. the forecast of 3.1%. This pushed Sterling to the potential resistance area at 1.5100 where it would hold, that’s until we saw weak economic data (Trade Balance -42.3B vs. -39B forecast) and positive corporate earnings from Alcoa, sparking a risk rally in equities, commodities, and high-yielding currencies.

This was the “straw that broke the camel’s back” and the temporary resistance fell to buying pressure.

With this change in short term sentiment on Cable, I have decided to close my trade early for a very small loss.

Closed trade at 1.5170.

Total: -70 pips/ -0.46% loss

I thought about hanging on to this trade, but with more potential volatility from an action packed Forex calendar this week and the start of corporate earnings season, unpredictable volatility may pick up. So, I have decided to stick to watching the market closely and not leave any open orders at this time.

So, a small loss for today, but there’s three more days of opportunities this week to make it up! Stay tuned for new ideas and updates! Thanks for checking out my blog!

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Trade Idea: 2010-07-12 7:00 pm ET

PoD Chart

I have the one hour chart above, and we can see that after finding support around 1.5100 all last week, the pair finally broke lower during Monday’s trading session. The pair is currently consolidating ahead of the UK CPI data scheduled for an 8:30 am GMT release later today, and if it does break out higher that broken support level, then I may be able to jump in at a better price to play my short bias on Cable.

Why am I short biased you may ask? Well, after a positive run up in Cable after austerity plans were released, it seems that the fact these measures may slow down the economy has started to finally sink into mainstream mindsets. Not a good idea for the debt burdened UK. Just today, Standard and Poor’s reaffirmed it’s negative outlook on the UK’s credit rating, as we still have yet to see these austerity measures executed and how the economy may react. This didn’t bode well for British Pound bulls today and now I think it’s an issue now in focused with Cable traders everywhere.

In today’s Forex calendar, if UK CPI does come out positive I think that will just give traders a chance to short the bigger picture of weaker growth in the middle-to-long term future from these austerity measures…at least for this week. If hits the psychologically significant round number of 1.5100, which happens to be previous support and the 61% Fibonacci area, I will short there with a stop of one daily ATR (150 pips) and target yesterday’s lows and beyond.

Shorting GBPUSD at 1.5100, stop at 1.5250, pt1 at 1.4950, pt2 at 1.4800

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

Stay tuned for updates and adjustments as I may close this one out at the end of the upcoming US trading session. Good luck and good trading!

  • mastergunner99

    I’m riding this one down with you as well. Though my T/P is a little lower than yours. I’m shooting for 1.4675. Last week price had no clue which direction it was going. Friday showed a clear direction and with the bulls have to be beyond tired out right now. Time for the bears to pull some pips in my bank.

  • mastergunner99

    I’m riding this one down with you as well. Though my T/P is a little lower than yours. I’m shooting for 1.4675. Last week price had no clue which direction it was going. Friday showed a clear direction and with the bulls have to be beyond tired out right now. Time for the bears to pull some pips in my bank.

  • Pipcrawler

    Hey Mastergunner99… It looks like the trade didn’t work out for me as I am keeping my trades short term for now, but if you stick to your “guns” I think this position could work out for ya over the mid-to-longer term… good luck!

  • expatyank

    I’m riding this one long until the 1.5250 area. The lower highs from Nov 2009 seem to me to be reversed since May 2010 and it’s been in a positive uptrend since. There’s just as much uncertainty in the usd with the sketchy accounting going on (claiming profit on the loss of value on bonds) as there is with the UK economy (but I’ll expect a downturn at some point once the government jobs get shed)

  • mastergunner99

    Yeah, I’m not a big fan of today’s movement, but I am sticking to my guns on this one. My stop is another 100 pips away at 1.5275. I don’t think today is going to get any higher than 1.5200. Come tomorrow through the rest of the week, I suspect price will begin it’s decline again. The bulls just needed to show off one more time.

    From a technical aspect, two interesting points. Today’s candle retested the upwards trendline as well if you draw some Fibonacci from this immediate little downtrend, price soared up to the 76.8. I don’t think it’s going to get higher than that.

  • Pipcrawler

    Hey Mastergunner99… It looks like the trade didn’t work out for me as I am keeping my trades short term for now, but if you stick to your “guns” I think this position could work out for ya over the mid-to-longer term… good luck!

  • expatyank

    I’m riding this one long until the 1.5250 area. The lower highs from Nov 2009 seem to me to be reversed since May 2010 and it’s been in a positive uptrend since. There’s just as much uncertainty in the usd with the sketchy accounting going on (claiming profit on the loss of value on bonds) as there is with the UK economy (but I’ll expect a downturn at some point once the government jobs get shed)

  • mastergunner99

    Yeah, I’m not a big fan of today’s movement, but I am sticking to my guns on this one. My stop is another 100 pips away at 1.5275. I don’t think today is going to get any higher than 1.5200. Come tomorrow through the rest of the week, I suspect price will begin it’s decline again. The bulls just needed to show off one more time.

    From a technical aspect, two interesting points. Today’s candle retested the upwards trendline as well if you draw some Fibonacci from this immediate little downtrend, price soared up to the 76.8. I don’t think it’s going to get higher than that.