Close Open Orders: 2013-02-06 3:30 ET
Cable sellers weren’t messing around during Tuesday’s session as they pushed the pair lower without hesitation during the US session. It looks like my entry level is out of reach ahead of the BOE event with all this GBP bearishness, so I’m closing my open orders.
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Well, the chart says it all, and what could have been a catalyst for additional selling was a report from the National Institute of Economic and Social Research (NIESR) from the UK. The NIESR sees the UK economic growing at only 0.7% vs the 1.1% (forecasted back in November), and only 1.5% in 2014. It’s not a closely watched event, but I think for those who did see it, it was additional confirmation that the selling should continue.
At any rate, I didn’t get the better price I was looking for and the pair dropped a good +100 pips from the level I spotted the setup. Since it looks like this trade won’t work out ahead of tomorrow’s BOE statement, I closed my open orders to short GBP/USD at 1.5780. No trade.
My first thought when reflecting on this trade is that I continue to suffer from the “perfect entry” syndrome. In other words, I’m pretty good with direction, but I continue to struggle with my entries. And what good is an idea if you don’t play it, right? Also, I was not aware of the NIESR report when I decided to short GBP/USD. That might have played a factor in my entry decision, so the lesson learned here is to pay attention to NIESR in the future when trading Cable.
Overall, it was a good technical setup, and while the surprise positive UK Services PMI data made it a scary trade idea for a second there, trend traders quickly made sure the Pound decline continued. I just gotta keep working on my entries…so only market entries going forward!? I just might try that out.
That’s it for now as I’ll probably chill out until after the ECB and MPC monetary policy decisions during Thursday’s European trading session. Until then, stay tuned by following my market thoughts and observations on Twitter and Facebook. Thanks for checking out my blog…good luck and good trading!
Trade Idea: 2013-02-05 06:45 ET
Good morning forex friends! Cable has been getting beat down for since the start of 2013, and it looks like sellers are still in control. Is today’s pullback higher another chance to short?
GBP/USD has been getting pounded for a while now, especially last week after weaker than expected UK manufacturing PMI sent the pair falling lower, a drop which was helped along by the US NFP report. Cable has recovered a bit this week despite a weaker-than-expected Construction PMI number from the UK on Monday (48.7 vs. 49.7 forecast), and today we got a better-than-expected Services PMI number to boost the Pound.
But that didn’t last long as sellers quickly faded the reaction, taking Cable to its current levels around 1.5765. This goes to show that the tendency in the market is to keep selling the Pound on rallies, which is what I’m looking to do.
Technically, I like the area of previous strong interest marked on the chart above as an entry point for a short-term trade; I’ll look to hold up until just before the Bank of England’s Monetary Policy decision this Thursday. Now, I don’t think we’ll see big moves up until then now that the UK’s reports are out of the way this week, so I’m going for a little over 1:1 trade with small stops and a small position. Here’s what I am going to do:
Short GBP/USD at 1.5780, stop at 1.5840, max profit target at 1.5700.
I’m going into this with a 0.50% risk to my account for about a 1.33:1 potential return-on-risk. I think today’s US session volatility will get the market back up to my entry point, and the overall risk-off sentiment we’ve been seeing during the US session lately bring the pair back down. Of course, if the story changes then I’ll adjust quickly; be sure to follow me on Twitter and Facebook for updates and adjustments.
Thanks for checking out my blog…good luck and good trading!