I see that an ascending triangle has formed on the hourly chart of Cable. This pattern is normally considered bullish, but not all the time. Given the current market environment and the overall long-term trend, I think it’s actually going to break to the downside!
I’m not going to jump the gun and sell at market though. That’s just silly and reckless! What I’m going to do is sell only when price actually closes below the 1.5500 major psychological level and the rising trend line.
I’m ultimately aiming for 1.5300, which is roughly equal to the height of the triangle. But since the target is very far, I may take half of my position off at 1.5400. For now, I’m eyeing the 1.5550 minor psychological handle as my stop loss. That can still change though, depending on how high the pair pulls back before falling. Wherever the pullback stalls, I will set my stop a little above it.
Fundamentally, there are talks going around the markets that the BOE could soon ease monetary policy even further. A report from the Financial Times said that insiders in the central bank could launch more stimulus measures to provide the economy with more liquidity. Yikes! If the rumors are true, I’ll be ready to get in on the pound’s slide.
If not, well, there’s always risk aversion. The European debt crisis continue to dominate headlines with concerns mounting about Spain’s bailout, rising bond yields in Italy, and Greece’s upcoming elections. I won’t be surprised if we hear more bad news from the region that would consequently send the pound, along with other higher-yielding currencies, down the charts.
To recap, my plan is to:
Sell GBP/USD around 1.5500, SL at 1.5550, PT1 1.5400, PT2 1.5300. 1% risk. (Risk disclosure.)
There ya go! What do you think of my trade? Hit me up with your comments!
