If you've been watching the Pound pairs for the last day or so you are seeing a lot of horizontal movement. The market seems to be waiting to see what the BOE rate decision is going to be on Thursday at 0700 EST (1200 GMT). The common wisdom of price theory would say that the overwhelming opinion that the BOE is going to cut rates would already be priced into the Pound pairs, but history would indicate otherwise. This article on the issue (click here) shows that the GBP has moved significantly upon release of the rate decision in both January and February of this year, even though the decision was exactly what was expected. The bottom line is that we can expect some movement on Thursday morning (my time).
That having been said, I like the look of the GBP/CHF the best. It is moving very nicely in a horizontal channel and has been for the last day and a half or so. I'd look to buy at a close on the hour bar above 1.6603, and sell on the same time frame below 1.6439. My stops will go at the opposite channel lines as usual. Because of the potential for unusual moves because of the rate decision, I'm moving to break even at +30 and putting a 10 pip trailer on it after that. I'm not looking to make a killing, just a few solid pips.
An alternate way to trade this move would be to draw the channel lines a bit inside the lines I've given above. If you look at the hour bars for the last 30 hours or so you'll see that the price has not closed above 1.6558 or below 1.6458 in that period (a 64 pip narrower channel). The prices have moved above and below those levels, but not closed higher or lower. One could take the trade if the pair closed above or below that channel, but it is riskier. You could also take half your trade on closing outside the narrow channel and half above the wider channel. There are many ways to play this game, the secret is to choose your method, don't risk too much, and be consistent. I'll keep you posted.
Happy Trading!
That having been said, I like the look of the GBP/CHF the best. It is moving very nicely in a horizontal channel and has been for the last day and a half or so. I'd look to buy at a close on the hour bar above 1.6603, and sell on the same time frame below 1.6439. My stops will go at the opposite channel lines as usual. Because of the potential for unusual moves because of the rate decision, I'm moving to break even at +30 and putting a 10 pip trailer on it after that. I'm not looking to make a killing, just a few solid pips.
An alternate way to trade this move would be to draw the channel lines a bit inside the lines I've given above. If you look at the hour bars for the last 30 hours or so you'll see that the price has not closed above 1.6558 or below 1.6458 in that period (a 64 pip narrower channel). The prices have moved above and below those levels, but not closed higher or lower. One could take the trade if the pair closed above or below that channel, but it is riskier. You could also take half your trade on closing outside the narrow channel and half above the wider channel. There are many ways to play this game, the secret is to choose your method, don't risk too much, and be consistent. I'll keep you posted.
Happy Trading!
