We could see one more burst of volatility for the Greenback tomorrow, making this setup on GBP/USD a play into the weekend.
Short-term Resistance on GBP/USD?
In my watchlist post on Tuesday, I pointed out a the possibility of downward momentum ahead for GBP/USD after parliament voted for Theresa May to renegotiate the Brexit deal. That possibility went out the window after the FOMC meeting struck down the dollar as the Fed looks to be patient with monetary policy changes as the case for rate hikes has weakened in their opinion.
While Cable did pop higher on the news, selling pressure came along quickly around the 1.3150, which I think is due to the idea of a “no-deal” Brexit still being a possibility outweighing the Fed’s latest monetary policy statement.
I’m short biased in the short-term given this price action, and tomorrow’s U.S. employment report may bring some volatility and another opportunity to play my bias at a better price. The expectation for the NFP report is to continue to show sustained improvements to the jobs numbers, so it’s possible we may get some dollar bulls to come out to play around the event.
So, I’m looking to play the event with a small position, but only if the market gets back up to the falling highs and minor resistance area I highlighted in the one hour chart above. My stop will be the daily ATR from my entry price, and my target will be the lows for the week for a great short-term potential R:R. Here’s what I’m doing:
Short a quarter position GBP/USD at 1.3155, max stop at 1.3220, max target at 1.3060
I’ll be risking only 0.25% of my account and my potential max return-on-risk is about 1.46:1. Of course, I’ll look to add further to the position or I’ll adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on if we see bullish developments on Brexit.
Stay tuned and as always, 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 simply follow what I do.
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