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Closed Orders: 2013-12-18 13:46 ET

It looks like Cable rallied higher without me after finding a bottom this week at 1.6220 and positive UK jobs data. With the Fed decision coming up in minutes, I’ve decided to close out my open orders.

GBP/USD forex chart review
GBP/USD forex chart review

The chart above says it all.  A nice rally today thanks to a positive surprise in the UK jobs data: unemployment falls to 7.4% from 7.6% and claims decrease to -36.7k from the forecast of -35k.  And as I previously mentioned we’ve got the Fed coming up on the much anticipated decision of “to Taper, or not to Taper.” If they do Taper, the probability is high that the Greenback would rally, which means I don’t want to go short USD at 1.6200.  And if they don’t Taper, well, I already missed the rally.  So, I decided to close out my open orders at 1.6200 to watch and re-assess.  No trade.

Of course in hindsight, I probably should have just entered a small position at market, but with so much major events coming around, experience tells me to be a bit more cautious.  Next time I probably will go in at market, but with a smaller decision.

That’s it for me today.  Again, I’ll watch what happens today, and maybe come up with another trade idea if an opportunity arises.  Stay tuned!

Trade Idea: 2013-12-17 11:54 ET

Finally got a decent pullback in the strong Cable trend higher that goes back to the beginning of November. Is this an opportunity to get on the longer-term rally at a better price?

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

GBP/USD 4 hour forex chart
GBP/USD 4 hour forex chart

My catalyst for this trade is the FOMC monetary policy statement tomorrow. They started their meeting today, and tomorrow afternoon, they’ll let the world know whether or not we’ll see a reduction in their bond purchase program. And even though US data has been better, it’s still not great. I’m in the camp that thinks we won’t see a Taper tomorrow with the possibility of forward guidance for a Taper, and that the Dollar may feel a bit of pressure on the event. If I’m right, there’s a pretty decent R:R setup going on now technically, and if I’m wrong, well…that’s what stops are for.

In the 4 hour chart above, we can see the pair has pulled back to the broken resistance area around 1.6250–is it now support? It’s the first touch of the area, so I’ll be a bit conservative by waiting for the market to hit a major psychological level before entering. My stop will be wide, about one-half WATR, and my target will be the swing highs. Here’s what I am going to do:

Long half position GBP/USD at 1.6200, stop at 1.6100, profit target at 1.6450

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.5:1. 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.