The MPC came to play today as they cut a whopping 150 basis points! That brings the interest rates in the UK down to 3.00 percent and a lot of volatility to Cable.
The pair shot down shortly after and broke the trendline. Unfortunately for my trade, where I was entering short is where everyone else was taking profits and buying up Cable. My stop wasn’t wide enough to handle the whipsaw as the pair rallied back up to 1.6000 before dropping back to pre-announcement levels. Doh!
Total: -250 pips/ -1.0% loss
So, I took another small hit today, but I am still bearish in this pair as the world shifts the focus back to fighting a global recession. Stay tuned!
Trade Idea: 2008-11-05 23:38
Price action in Cable seems to be calming a bit, forming a symmetrical triangle pattern on the four-hour chart. Traders are awaiting for the Monetary Policy Committee’s decision on UK interest rates later today. The question isn’t whether or not “if” the MPC will cut rates, rather than “by how much?”
Will they cut by the projected 50 basis points or will the MPC be more proactive in fighting the recession by cutting more? Either way, I think we may see more Sterling bearishness and possibly more volatility after the decision to cut, especially if the statement is dovish on the state of the UK economy.
I’d like to short on a break of the triangle to the downside and target the previous lows hit around 1.53. My stop will be a wide 250 pips as we are still in a highly volatile environment.
Here’s what I’m going to do:
Short GBP/USD at 1.5750, stop at 1.6000, pt1 at 1.5500, pt2 at 1.5250
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
If the trade works out my way, I will possibly target beyond the previous lows by using a trailing stop. Stay tuned for adjustments!
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