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Close Trade: 2010-04-16 14:25 ET

PoD Chart

Good afternoon friends! We saw quite a bit of volatility in Cable since I posted my trade idea as the pair jumped back and forth between 1.54 and 1.55 this week. With the weekend approaching fast, I have decided to close the trade to avoid weekend event risk.

Closed trade at 1.5400

Total: +50 pips/ +0.33% gain

Well, it looks like the change of heart from Greece about taking help from the EMF and IMF brought back some risk aversion and flows back into the Greenback, but it wasn’t enough to break the support area around 1.5380. I believe that risk aversion will carry onto next week, but as we saw last week with the offer of help to Greece, anything can happen over the when the market is closed. Why take the chance?

If the opportunity presents itself again, I’ll jump in this pair short, but until then it’s time to go enjoy the weekend with my small gain!!

Thanks for checking out my blog and have a great weekend everyone!

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Trade Idea: 2010-04-12 18:06 ET

PoD Chart

Good afternoon! Pretty interesting turn of events this past weekend with the support offered by the EMF/IMF to Greece! We saw currency pairs gap up and down all over the place, showing us how fun weekend event risk can be, right? With the support for Greece priced in, where will pairs like Cable head to next?

Technically, Cable has made it’s way higher after finding strong support around 1.4800 and has tested the 61% Fibonacci retracement around 1.5420. To me, I see a bearish daily candle formed at the close of today’s trade, and with stochastics showing overbought conditions on both the daily and four hour charts, I think the bulls may have run out of steam in the short term.

Fundamentally, while it’s great that Greece has the option to borrow money below the market rates now, it doesn’t mean Greece will be able to cut enough spending to get back to fiscal soundness. There’s a lot of moving parts to this story and to read more, be sure to check out Forexgump’s article, “Happily Ever After in Greece?” So, only time will tell if Greece will pull through or not, and we will just have to wait and see.

Another thing to remember is that this doesn’t help the UK or the US at all, other than bringing risk tolerance support to the Pound. How long will that story have an influence?

Besides, both countries are still facing huge budget deficits, employment and housing issues, but we’ve seen slightly improving economic data as of late. With that said, I think the British Pound is still more vulnerable with the uncertainty of the upcoming elections, the potential debt downgrade, and banking issues on the minds of traders. Plus, if we do see consumers demanding goods and spending soon, then the improvement recent data numbers won’t mean a thing. This could potentially bring on another round of risk aversion–potentially great for the Greenback and bad for the Pound.

So, I’m short bias on Cable and I look to jump in with another test of 1.5450 – 1.5500 just to be sure the Greece bailout story has played out. We have plenty of data this week to hopefully give me enough volatility to get in at a better price, and I think the direction for this pair will be dictated by the result of the this week’s US retail sales data (Wed. 1230 GMT). My stop will be the Average daily range of about 150 pips, and I will target last week’s lows around 1.5150. Here’s what I am going to do:

Short GBPUSD at 1.5450, stop at 1.5600, pt1 at 1.5300, pt2 at 1.5150

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

So, that’s a 2:1 reward-to-risk ratio and a pretty solid trade plan. Let’s see how it pans out!

Thanks for checking out my blog and please feel free to leave a comment (or two)…good luck and good trading!

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