Potential Area of Resistance to Hold on GBP/USD? – Closed Open Orders

Closed Open Orders: 2012-06-27 3:48 ET

Good morning forex fiends! It looks like the market doesn’t want to play nice with me as it barely touches my first short level (1.5650), or narrowly misses it, and does not trigger my trade. I’ll take it as a sign to stay out of the markets, so that’s what I’ll do…

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

PCDPOD20120626.review.png

Cable did rise up to my first entry point at 1.5650 (twice), but it either didn’t trigger my orders or barely missed the retest. And yesterday, we got testimony on inflation and the economy from members of the BOE’s Monetary Policy Committee, which produced negative comments from governor Mervyn King. Yet we saw a muted reaction and no strong drop in the Pound.

This concerns me a bit and has me thinking that there probably just aren’t a lot traders in the market ready to take on a position ahead of the results of this week’s EU summit. And without any major events in sight to spark a big move this week, we’ll probably see continued consolidation. With that, I’ve decided to close my orders to short Cable at 1.5650 and 1.5700. No trade.

As we roll deeper into the summer, I think we’ll be experiencing more ranging weeks than before, at least until some new crisis development pops out of no where. To me, it just feels like traders are either on standby mode or already enjoying a holiday on a nice, sunny beach somewhere–where we all should be!

That may be it for me on swing trades at the moment, but I am keeping my eye out for some quick day trades before the end of the week. Stay tuned for my market observations and ideas by following me on Twitter and Facebook. Thanks and good luck!

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Trade Idea: 2012-06-26 04:05 ET

Good morning forex friends! It’s the last week to go out on a positive note for the month, and more importantly, the quarter. So, I’m seeing an opportunity form on Cable that just might give me the chance to end this rough stretch of trading for me with a smile on my face.

PCDPOD20120626.png

On the one hour chart above, we can see quite a few things going on to make a technical argument for a potential resistance area. First, we see that the major/minor psychological levels between 1.5600-1.5700 have previously served as strong support and resistance points in the recent past; they may draw the same kind of attention once again.

Second, we can see that a rising trendline was broken, tested and held as resistance. Now, if the market does continue to rise, that trendline could be tested once again with the potential to draw in Cable bears.

So, we have intersecting previous areas of interest that lends me to think that the probability of drawing traders is probably better than average.

Fundamentally, I’m basing my short bias on an excellent article written this past weekend by Forexgump. Last week, we learned 3 Important Things about the UK:

  1. CPI fell to its lowest level in two years
  2. More policy makers support QE
  3. Retail Sales up more than forecast


To me, the big market drivers for the Pound for the short-term (besides over all risk sentiment) will be falling inflation, which lends to a higher probability we’ll see more QE from the MPC. Other traders out there could be thinking the same thing, which means we may see additional quantitative easing priced in for a bit.

For now, I think we’ll see a bounce higher in risk taking after the big sell off in risk over the last few sessions, which should put me into my position at a better price. Here’s what I am going to do:

Short half position GBP/USD at 1.5650, stop at 1.5785, profit target at 1.5450

Short half position GBP/USD at 1.5700, stop at 1.5785, profit target at 1.5450

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

If both positions are entered, this trade structure gives me a potential return-on-risk of about 2:1. The forex calendar is light on top tier events this week, but there are plenty of potential market movers to push the pair around a bit at a time. As always, I’ll keep a watchful eye out for sentiment shifting events, and if decide to adjust my orders/position then I’ll be sure to update on my Twitter and Facebook pages.

Stay tuned and thanks for reading…good luck and good trading!