Trade Closed: 2013-09 00:25 ET
UK inflation data didn’t provide the catalyst I was looking for as it came in mixed and slightly negative. The pair remained in the range all session as sellers held 158.00 and buyers at 157.50.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
So, Tuesday’s session was a snoozer for guppy as UK inflation data wasn’t enough to bring on the breakout above 158.00 I was hoping for. Price action was enough to get me in the trade at 158.00 ahead of the event, but not enough to take it any further. With the market staying quiet and the Taper event coming up soon, I’ve decided to go flat by closing manually at 157.79 for a very small loss.
Total: -21 pips/ -0.07% loss
With that trade out of the way, I’m going into reactionary mode, which means wait-and-see mode as to what the Fed will do later today and how the markets will react. It should be a big event…or maybe not. It’s been talked about for months so it may be already priced in, but remember that it’s still an unprecedented event for most traders out there.
Stay on your toes everyone, be ready and remember to focus on making good trade decisions rather than profits. Good luck and good trading!
Trade Idea: 2013-09-17 3:30 ET
Good morning forex friends! With the “Taper” only a day away, I’m sticking to short-term trades to avoid the unprecedented event risk. With data from the UK on CPI coming our way soon, I like a bullish play on GBP/JPY.
The British Pound has been on a tear for the past few weeks thanks to an increasingly positive outlook for the UK, sparked by recent positive data. On the other side of the globe, the Japanese Yen has been weakening thanks to improving risk sentiment as the likelihood of US military action on Syria dies down, as well as a looming sales tax policy change looms in Japan. So fundamentally, buying guppy makes sense at the moment.
Technically, on the smaller time frames, we’re seeing consolidation this week so far, which is often a precursor to a breakout with the right catalyst. For today, that catalyst may be the UK CPI report, due to release in about an hour. This report tends to spark short-term volatility and direction that doesn’t usually last into the US session. With this type of behavior, I’ll be watching this closely and going for relatively small pips.
My entry will be slightly above the current consolidation marked on the chart, with a stop tightly below it. My max profit target is the next major psychological area, but I’ll be watching this closely and most likely, will close manually on any resistance at psychological levels. Here’s what I am going to do:
Long GBP/JPY quarter position at 158.00, stop at 157.25, profit target at 159.00
Because this is meant to be a day trade only, I’m only risking 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.33:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.