Good evening forex fanatics! I've decided to start this week off with a very simple day trade play Cable as we get into the yearly UK CPI numbers. Will this event spark the action I need?
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
As I mentioned earlier, we have data from the UK in the form of the yearly CPI number. Looking back, it looks like the trend for inflation has been steadily dipping lower, and probably the reason as to why the forecast is lower than the previous read (4.2% vs. 4.8%). Also, the reaction to this data point tends to be with positive correlation, meaning a weaker read tends to bring on a weaker British Pound.
Of course, no one really knows what we will see, but I think this event will bring the market quite a bit of volatility, and if it hits the minor resistance area marked up on the chart above, around 1.5350, there may be
enough sell orders for Cable bears to hold off the bulls and jump in at a nice price. Also, given the potential for negative sentiment to hit once again after the S&P downgrades, and when the US opens up after a holiday weekend, I like this area for a day trade short, so this is what I'll do:
Short GBP/USD at 1.5350, stop at 1. 1.5410, pt at 1.5240
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.
This trade structure gives me a potential near 2:1 return-on-risk as I go for Friday's low, and because it is a day trade, I am reducing my risk to 0.25% of my account.
As always, if the market environment shifts on a new catalyst, I'll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my
blog...good luck and good trading!
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