We’ve got some action potentially coming for the British pound , making this simple range setup an attractive short-term forex trade.
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As mentioned above, this is a a simple play on the resistance area between 1.44 – 1.45 that’s held strongly throughout 2016. The market is already back to retest this area, and at the same time, the stochastic indicator is showing potentially overbought conditions in the short term.
My main man Forex Gump did a quick rundown on what could be the potential market mover to make this trade work: the U.K. employment report. It wasn’t a big market mover the last time around because of pending U.S. data, but this time around it should get pound pairs moving, especially with a surprise in wages or the unemployment rate.
We’ve also got the U.K. retail sales report on Thursday to hopefully provide another boost in volatility, and with two major events from the U.K. coming up, I’m definitely gonna shoot for that previous support level (and 2016 low) as my max target for a nice potential return-on-risk.
Of course, no one knows exactly what we’ll get from the data this, so as always, I’ve structured my trade in a way to survive a pickup in volatility, limit my risk, and give me a favorable return if I’m right. Here’s what I’m doing:
Short half position at 1.4400, max stop at 1.4680, max profit target at 1.3900
Short half position at 1.4500, max stop at 1.4680, max profit target at 1.3900
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.55:1 if both positions are triggered. 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!
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