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Close Trade: 2009-09-11 11:49

Doh! US Dollar selling was strong across the board this week, pushing Cable higher and higher! My short entry orders at 1.6615 and unfortunately, there wasn’t enough USD buyers at these previous resistance areas to offset the USD sellers. With the European session dying down and the weekend quickly approaching I have decided to close my trade.

Closed trade at market (1.6692)

Total: -77 pips/ -0.46%

So, less than half a percent hit for the week – nothing to cry home about. In retrospect, I probably should have closed the trade down early when the Bank of England announced that there would not be any changes to their current quantitative easing efforts. This boosted confidence in the recovery and lessened the need for safe haven plays like holding Greenbacks. But I stuck with the technical trade – markets tend to range during uncertainty and I had probability on my side…it just didn’t work out this week. Oh well, gotta get focused for next week, but until then thanks for checking out my blog and have a fun and safe weekend!

Trade Idea: 2009-09-09 17:58

PoD Chart

Good afternoon Forex friends! We’ve got some potential volatility coming up from the MPC interest rate decision later, so I hope to catch some quick moves on a technical play. Will we see a retest of resistance on GBPUSD?

I have the 4-hour chart up, and we can see a few things going on here arguing for a short trade. First, the pair has been rising higher ever since hitting a low last week around 1.6100. According to stochastics (14,3,3), this rally may be overbought and ready to swing lower. I think this may occur if the pair rallies to previous resistance around 1.66. Finally, I have highlighted bearish divergence (higher “highs” in price, lower “highs” in indicator), signaling a possible short-term reversal to the downside.

Fundamentally, there is still uncertainty on whether or not we are in the midst of a global economic recovery or if there is another “shoe to drop” lurking around the corner. I believe this uncertainty will keep markets rangebound in the short-term, with a little bit of upward bias in risk sentiment. Hopefully, that will bring me up to a better price to short Cable.

We have the Bank of England’s interest rate decision coming up later at 1100 am GMT. Forecasts are for the MPC to keep interest rates at 0.5% and unless we see a surprise change, I don’t expect an extended breakout one way or another. Soon after, we will get data from the US – jobless claims and trade balance data. There should be some nice volatility during the European/US trading overlap. Be ready!

Taking into account these events, I have chosen a very conservative entry point if Cable does rally, with a wide stop of 165 pips (daily average true range), and my profit targets will be at yesterday’s low (1.6450) and this week’s low (around 1.6325). Here’s what I am going to do:

Short GBPUSD at 1.6615, stop at 1.6780, pt1 at 1.6450, pt2 at 1.6325

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

Stay tuned for updates and adjustments!

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