I fell head over heels for this setup on GBP/USD almost as soon as I saw it on Big Pippin's Daily Chart Art. Doesn't that descending channel look oh-so sexy?!? I'm not gonna go gaga in selling the pound just yet though, as I think it still has some room to go higher.
The pair has been rejected at the falling trend line a few times since last week. I'm expecting price to test it once again today so I placed a sell order around the area at 1.6150.
As for my stop, I put it well above the trend line at 1.6215 to take account any unexpected volatility that may come with today's potential market-movers. I'm going to take profit at the bottom of the channel at 1.6030.
Fundamentally, I'm also bearish. For one, the U.K. has slipped into a recession again. The U.K.'s economy was reported to have shrunk by 0.2% for the first quarter of 201. In addition, the euro zone's debt problems have flared up again with Greece and Spain on the spotlight.
I think the success (or failure) of my trade will depend largely on how the Bank of England (BOE)'s interest rate decision will go later. The market widely expects the central bank to keep rates unchanged and implement no additional quantitative easing.
How the accompanying statement will go, however, is still up in the air. I think they're going to be bearish though, given all the risks present in the global economy.
To recap, here's my game plan:
Short GBP/USD at 1.6150, stop loss at 1.6215, profit target at 1.6030, 1% risk. Risk disclosure.
GBP/USD: Riding the Falling Channel - Took Profit!
It was a rough ride for my GBP/USD trade but in the end, everything turned out very well. As you can see price spiked up slightly after I had entered. The move didn't last long though as the bears quickly pushed price down before the week came to a close.
According to Pip Diddy, GBP/USD fell mainly because of risk aversion from Greece's political problems. I'm not an economist but from what I read, the New Democracy, Syriza, and Pasok political parties failed to form a coalition, which greatly enhanced the chances of a "Grexit."
Trade closed at 1.6064: +86 pips / +1.32%
Well, that's it for my update. I plan to put up another trade idea some time in the next few days so stay tuned for that!