Trade Closed: 2010-07-13 11:40 am ET
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!
Trade Idea: 2010-07-12 7:00 pm ET
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!