Yesterday, about the time ECB was cutting rates and Euro started its rally, Bank of England also made rate announcement. They decided to leave the rates unchanged. Not much of a surprise, really, considering how low the rates are. Instead BOE announced increasing money supply by additional 50 Billion Pounds. None of this is raising an eyebrow any more. What should, though, is the reaction by GBP, or rather by traders. Pound was dumped by truckloads, falling against all major currencies. That was yesterday. Today, while a recovery is under way in relation to USD and JPY, Pound still looks in real pain comparing to other European currencies, namely EUR and CHF.
Similar actions by central banks followed by completely different outcomes. Fundamental trading at its finest, great case study for those who want to trade economic news releases. And a prime example of why I don’t. What happened Yesterday, didn’t bother me, I saw it as a correction, but today’s follow up surprised me. Specifically, what is happening in GBP-CHF. I did a longer term analysis of this pair here,and, based on that post, long trade was entered few days later at 1.6789. Everything looked good, price moved up in a steady pace, until yesterday. originally I wanted to take partial profits at 1.7300. Had to step away from computer yesterday, before BoE decision, so instead close half the trade at 1.7209.
Price collapsed shortly after. Of particular concern to me is that 1.7300 (X on chart) was not reached at all. It was seen by me as a crucial step to farther advances I put a stop/loss to for the rest of the trade. It had been in profit so much, I considered it a shame to let the trade fall under entry level. Well, today trade was closed at 1.6905. Disappointing, to a degree, but still average profit was about 250 pips. Funny part is, had the position gone into negative territory from the start, it wouldn’t have bothered me, but as is, I simply don’t want to see it turn into a looser. My outlook is still bullish and vigil for more buy set ups on all time frames starts on Monday.
Yesterday I placed couple of buy orders in EUR-CAD.
Price fell and triggered my lower buy order at 1.5555. This trade had a target of 1.5710-20. Given time of the day on Friday, I decided to close it, for still healthy profit of 110 pips. Had it been any other day of the week, trade would still be live. Breakout order at 1.5745 is still valid, but I will NOT be seeking another entry at lower level. With 100 SMA still sloping down, price drifting to 1.5555 or lower is not a bullish indicator. This trade is called “as planned” and it closes book on a decent week.
Mike K.
This was a great trade , eurcad. One thing to watch it and react to fast moving market, but to plan it day ahead and be right is another story altogether. I hope one day you’ll explain how it’s done.
Thank’s. I liked this trade, too. This situation doesn’t happen very often.
Well, gbpchf tanked bad. You got out with some profit. Good profit. I think this is a good time to buy it now. What do you think?
Mike, would it be possible to do an update of gbp-jpy sometime during the weekend? Thanks!
Heather, maybe, will see.
Bob- I just got out of that.Is it a good place to buy? Probably, but I don’t trade “levels”, rather try to see what price does around the “level”( most of the time).
Lets see if we get some GBP follow through on that post-BOE tank and reverse. Just have to remind myself that long term strategy and short term trading often don’t mix very well.
http://stephenvita.typepad.com/alchemy/2009/05/saturdays-art-of-the-chart-dollar-changing-trend-5909.html
Hi Mark, this link takes us to Dollar Index chart. Pound did OK in relation to usd on Friday, while lost to eur and chf. That chart looks like dollar will keep falling. I also think gbp-chf will have a nice bounce sunday/monday.
Hi Michelle the link to the USD index was my way of suggesting a bias towards a stronger pound – just not sure how long it might take to play out.
I’m with you. It is probably easier to figure out projected target for a move, rather than how long it might take. Mike usually gives some kind of time frame for his trades. It is better to have some idea (even if not perfect0, than be totally blind in this aspect of trading. When you think about, there really are a lot of elements coming into play for every single trade.
One of your posts from last year got some buzz over the weekend, “Who makes money trading Forex”? How are the pross doing this year?
GR, yeah, that was a surprise. Lot’s of emails yesterday. I’ll talk about this year’s result later on in the week.