GBP Panic

Now that was stress. I got caught on the wrong side today. Was long EUR GBP and hell broke loose ;-) Within 2 hrs -110. Luckily I had a stop at 0.9270. Due to the strong move I went aggressively short and closed the position 0.9225. That way I got out with a little gain.

Will stand aside for now.

GBP outlook vs USD and EUR

Fundamentally I am still bearish on GBP. And as long as GBP USD is lower than 1.6130 the downtrend stays intact as well.

However, with equities and gold going higher almost every day, the USD is weak. Can this continue forever? Most likely not, but I am not the one trying to catch the reversal. Too expensive!

Therefore I entered long EUR GBP yesterday @0.9320. SL 0.9270.

GBP USD short closed @1.5790

GBP USD short closed @1.5790 with 240 pips profit.

I still think there is some potential, but for now the pair is locked in between 1.5750 and 1.5850. I might re-enter tomorrow depending on the fundamental news out of UK and US. At the moment the USD is quite weak. EUR up to new highs.

Update on GBP USD Short

Update re GBP USD short trade. Initial analysis here:
http://market-trading-ideas.blogspot.com/2009/10/gbp-usd-short-opportunity.html


The GBP USD short trade analysed on 08.10.09 turned into a good profit during the first day (+200 pips by now). On Monday the pair traded lower during the first hours of the London session and reversed immediately. Since then the pair is trading in a narrow range between 1.5780 and 1.5830. I moved the Stop Loss to 1.5950 to secure some profits.


Important economic data, which will be released on Wednesday and Thursday this week, might act as a catalyst to push the pair significantly lower. However, the event risks also have the possibility to move the price against the trade.

• Jobless Claims Change UK, GMT 08:30 AM, Wed 14.10.09
• Advance Retail Sales United States, GMT 12:30 AM, Wed 14.10.09
• Import Price Index United States, GMT 12:30 AM, Wed 14.10.09
• USD FOMC Meeting Minutes, GMT 18:00 AM, Wed 14.10.09

GBP USD Short Opportunity

Current GBP USD price seems like a good short opportunity to me

• Downtrend in the weekly chart
• Downtrend in the daily chart
• Price is close to resistance at 1.6130

GBP USD is locked in the 1.5870 - 1.6130 range since the Head-Shoulders neckline was broken (since 28.09.09). We are currently trading at the upper end of the range. With the weekly and daily trend pointing down, that opens up a nice short opportunity with a good risk-reward ratio. I entered

• P: 1.6029
• SL: 1.6150

I keep position size "medium", risking 2% of trading capital based on the stop above. If the trade goes in my favor I normally add to the position and pull stops up to break even.

Targets are

• 1.5870 (previous swing low)
• 1.5790 (lower range support)
• 1.53 (about 100% extension from neckline and also a former consolidation zone)

Weekly Chart

Daily Chart



4hr Chart

USD / GBP: Will BoE Meeting Break The Range

• The long-term trend (weekly chart) in GBP / USD is down
• Prices broke under the neckline of the Head-Shoulders pattern in the daily chary
• Prices moved sideways since 28.09.09

The GBP/USD prices stabilised in the 1.5850 - 1.6130 range after the neckline of the Head-Shoulders pattern was broken downwards. The pair stayed in that range since 28.09.09, however, a breakout is possible today.

GBP/USD, weekly


GBP/USD, daily



The Bank of England Monetary Policy Committee Decision on interest rates and the Asset Purchasing Target are due at 11.00 GMT today. This event can act as a catalyst and move the pair over 100 points in either direction within the first hour of trading. In the past a further extension into the initial direction was often recorded. By trading with the trend profitable trades were feasible in the past.

In case the pair breaks out of the 1.5850 - 1.6130 range further potential opens up over the next week. If the 1.6130 resistance falls, upward potential to 1.6400 opens up. In case of a break below the support at 1.5850 a fall 1.53 is possible.

Recent UK fundamentals and the comments by BOE Governor Mervyn King in regards to the economic advantages of a weak GBP might suggest a surprise to the downsize. E.g. by increasing the target for the asset purchasing scheme. Of cause that's pure speculation.

EUR/USD Short Opportunity

A short opportunity exists in the EUR/USD pair

• The long-term uptrend is showing signs of exhaustion
• The short-term trend in EUR/USD is down
• The price has reached a first resistance level

The EUR/USD has carved out a swing high at 1.4815. The uptrend in the daily chart shows signs of exhaustion. The chart becomes "less steep" (green trendlines in daily chart).

The short-term trend is down (orange channel in the daily and 4hr chart). The short-term downtrend (orange) has reached the lower end of uptrend channel (green). If prices can break this trend barrier, further downward potential is opening up. Current resistances to the downside are at

• 1.4530 former swing lows in the 4hr chart
• 1.4400 former swing highs in the daily chart (blue horizontal line in daily chart)
  

The long-term uptrend is showing signs of exhaustion in the daily chart



The short-term trend in EUR/USD is down (4hr chart)



Trading Strategy
Sell on EUR/USD rallies. I opened a short position at 1.4635 after the NFP release rally on Friday 02.10.09. My initial target is 1.4400. If the short-term trend continues, I might add small short positions. EUR/USD is currently strongly impacted by the markets risk perception. As long as the share market goes down (or stays flat), the EUR/USD will most likely continue to fall due to the "safe haven" character of USD.

My entry was P: 1.4635, SL 1.4775, TP 1.4400

USD/JPY Update

The USD/JPY long has been stopped out.

Original trade set-up:
USD/JPY Long Opportunity

Trading September 09 NFP Release

The NFP data (non-farm payroll) gets released on the first Friday of each month at 08.30 New York time. This is currently EDT (Eastern Daylight Time), which equals GMT-4. Info on NFP.

The NFP data release can move the USD +/-100 pips in a few seconds. I wrote an abstract before with a suggestion how to trade the release (Link). The main recommendation is to wait at least 30 minutes after the release before entering a trade. The initial reaction often goes into the opposite direction compared to the price development for the rest of the day.

Today there are 2 major factors to consider, when entering trades

• NFP Results
• Dow Jones Opening Trend

Currently the USD price action is mainly driven by “risk/ risk aversion”. Indications for a better economy lead investors to taking on more risks. Therefore commodity currencies (impacted stronger by economic growth) like AUD and CAD rise on good economic news and the USD falls. If the indicators provide a negative signal on the economy, the “safe haven” currencies USD and JPY are most likely to rise.

NFP Results
A Reuters survey of experts expects a change in the September NFPs of -180,000 (compared to the -216,000 in August). Goldman Sachs however recently revised their estimate from -200,000 to -250,000. If the NFP results indicate a stronger economy (e.g. 150,00 or less jobs lost) the USD will most likely fall vs EUR, CAD and AUD.

If results are 250,000 or larger indicating the economy is worse than expected then USD will most likely rise vs EUR, CAD and AUD.


Dow Jones Opening Trend
The US stock market opens at 09.30 NY time, one hour after the NFP release. Yesterday the Dow was down 203 point / 2.09%. If the downtrend continues, the risk aversion will most likely drive up the USD further. This effect might start before the opening at Wall Street as futures get traded earlier and give an indication on the opening direction.