It seems a must to do a Pound review in light of recent sell off of that currency. Move started rather stealthily, but accelerated recently, to reach historic proportions. One wouldn't necessarily noticed it on a day to day basis. Reason is, there hasn't been one day with a huge drop, something to make on the front pages, but rather a string of sessions when GBP lost ground. Just how bad has it been? August proved to be the worst month for GBP-USD since 1992, when UK left the European Exchange Rate Mechanism. That event was talked about for years to come, mostly on account of George Soros, the man who "broke' the Bank of England and made $1B in the process. Sterling lost 8.6% against USD in October 1992. This August, the slide was 8.2%, almost as big, yet there is not much talk about it. Probably because nobody predicted it. To round up this Pound review we must point out that the sell off has expanded to other pairs, not just GBP-USD. Last 2 weeks brought large drops in GBP-CHF and GBP-JPY and more. We think this move is overdone for the time being. Scroll down this page to see more.
Here in the USA we have a long weekend, Labor Day holiday. Most people have Monday off. Forex trading is usually slow, with moves, if any, happening during European session. Might be a good idea to take some time off...
Our services closed August on positive note, with both of them showing good gains. That is despite one very bad week earlier in the month. Please see the results below and follow the link to see details, including updated performance graphs.
(Sunday 08.31.2008.)
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Here are the results for last week:
- Daily Pound made 111 pips ;
- Daily Euro gained 85 pips;
Follow the link on the right to view details.
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Last week's results.
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Here is what happened to our trade from last week. We went long EUR-CAD at 1.5493. Initially price moved against us, but later in the week bounced our way and reached the target 1.5600, for a gain of 107 pips. Not a very good trade, but in the end it worked and produced some profit.
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Just like mentioned above, here is quick look at a weekly chart of GBP-USD. Long string of Pound bearish news caused a severe sell off over last few weeks. What is happening, most of the analysts are only just now recognizing it and are screaming for this move to continue to about 1.7200. We think that rebound is order, or, at the very least, a consolidation. Our expectation is for the price to stall in 1.8000-1.8200 area. This period can last from 3 weeks to 3 months or so. At this time it is difficult to speculate which way the price will move after that, but we think it will move up to about 1.9200. We expect to see some GBP strength in weeks ahead.
We will revisit this post in a few weeks and see what actually happened.
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In line with what we wrote about GBP above, we are putting money where our tongue is, metaphorically at least. Since we expect a sizeable reaction in pound, we decided to find a trade in one of the sterling crosses. EUR-GBP looks good to short and is very close to an all time level, but in the end we decided to try GBP-CHF. The set up here looks promising.
Our plan is to BUY it at 2.0140, and hold for about 100 pips, or 2.0240. If we are correct in our analysis, the potential for profit here would be much greater, maybe 500 pips, but since we are using 1H chart for this set up, target is dictated by the magnitude of moves on this time frame.
Have a great Labor Day and even better trading week!
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Once again we must stress that the trades highlighted here are only a small sample of our trades. If you have any comments or would like to obtain more information please contact us at info@spectrumforex.com .
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Risk disclaimer:
Substantial risk is involved. Forex trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the Forex markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of futures results. Trading involves high risks and you can lose a lot of money.
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