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Trade Idea: 2013-5-8 3:30 am EST

GBP/USD 1-hour Chart

After observing Cable’s price action for a few days, I have finally formulated a plan to trade it. As you can see from my chart annotations, the pair has been making “higher lows” and “higher highs,” which suggests that the bulls are in control.

Using the trusty Fibonacci tool, I’ve determined that the 61.8% level is a good entry point as it nicely lines up with the rising trend line. I’m not going to jump in immediately though. Given my recent string of losses, I’ll be more conservative and only enter when reversal candlesticks appear.

I’m ultimately aiming for the 61.8% Fibonacci extension level, but I’ll take half my position off at the former highs. As for my stop, I’ll place it below the rising trend line and the 61.8% Fibonacci retracement level, at 1.5300.

Now let me talk a little bit about the fundamentals.

In case you’ve been busy planning an epic summer trip, quite a handful of reports from the U.K. topped expectations.

For instance, the U.K. GDP report posted a 0.3% uptick for Q1 2013 despite forecasts that it would enter a triple-dip recession. PMI reports across the major sectors from construction, manufacturing, to services also came in better than expected.

I think that we will see the positive vibes brought about by these reports be reflected in the BOE‘s rate statement tomorrow. If Mervyn King sounds more optimistic about the economy or if we see that there are fewer MPC members who see a need for an increase in asset purchases, the pound could rally.

Oh gosh. I really hope this trade ends my losing streak. Wish me luck!

XOXO,

Huck

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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.