Pound Trade Plan
Each day, ForexChaser.com team produces a set of eight trade plans for the foreign exchange market. The trade plans are the main drawing board of ForexChaser.com: this is the place where most trade ideas come from.
Latest Update: August-03-2010, 11:00 ET
Gbp/Usd Overview: The last two months of trading had been very prolific for the Gbp/Usd. Over this period, the pair was driven by an economy that appears to show signs of recovery, at the same time as the U.K. CPI is refusing to come below the 3% threshold level. Some market participants are saying that the high CPI will force the Bank of Englad to raise sooner than the European Central Bank of than the Fed will.
ForexChaser.com team tends to favor Long Gbp/Usd for both intra-day or long term trading. The quantitative forecasts suggest that the pair could entry in a period of consolidation in the next few days, but volatility is expected to increase due to the upcoming BoE meeting. The next two levels that will have significant influence on the pair’s price action are 1.5960 and 1.6055. To the downside, we expect buyers to intervene in the 1.5720 area.
Gbp/Usd Options: Traders should buy a September Bull Spread. Long 1.5950 Call and Short 1.6250 Call would create an 120 pips exposure, but the upside potential would be as much as 180 pips.
| Percentage gain | Volatility | Trend | Signal | |
|---|---|---|---|---|
| Monthly | 4.90% | 12% | Long | Buy |
| Weekly | 1.70% | 16% | Long | Buy |
| Daily | 0.25% | 18% | Long | Buy |
| 4-Hours* | 0.09% | 17% | Flat | Hold or No Action |
| Daily Trading Signals | Entry | Target 1 | Target 2 | Target 3 | Stop Loss |
|---|---|---|---|---|---|
| Long | 1.5975 | 1.6025 | 1.6080 | 1.6160 | 1.5925 |
| Short | 1.5855 | 1.5800 | 1.5730 | 1.1600 | 1.5625 |
How to trade the Daily Trading Signals?
Investors should use the Daily Trading Signals as a guideline for placing trades on the daily time-frame. These signals should be loaded only when the Entry area is touched and traders believe that the currency pair is likely to continue to move in order to touch the targeted areas. When the Target is touched, closed 50% of the trade and move the SL to the prior Target area or set a trailing stop for the order.
E.g. When Target 2 is touched, close 50% of the trade and move the SL to Target 1
| Important Price Points | Intraday Level 1 | Intraday Level 2 | Daily Level 1 | Daily Level 2 |
|---|---|---|---|---|
| Resistances | 1.5960 | - | 1.6055 | - |
| Supports | 1.5855 | - | 1.5720 | - |
| Daily Correlation | Eur/Usd | Gbp/Usd | Aud/Usd | Usd/Cad | Usd/Chf | Usd/Jpy | Eur/Jpy | Gbp/Jpy | Aud/Jpy |
|---|---|---|---|---|---|---|---|---|---|
| Gbp/Usd | 86% | 100% | 78% | -60% | -71% | -45% | 67% | 87% | 55% |
Correlation quantifies how much two variables move together. In our case, it measures the relationship between two exchange rates, for example Eur/Usd and Usd/Chf. If the correlation coefficient is 0%, it means that there is no relationship between the two currencies (this happens very rarely). A 100% correlation means that the two currencies move identical, while a -100% correlation coefficient means that the two also currencies move identical, but in opposite direction.
| Gbp/Usd Quantitative Forecast | 1-Day Forecast | 3-Days Forecast | 5-Days Forecast |
|---|---|---|---|
| Price | 1.5850 ± 0.0090 | 1.6020 ± 0.0240 | 1.6020 ± 0.0330 |
| Volatility | 18% ± 0.72% | 18.5% ± 1.25% | 19% ± 1.75% |
These are one step-ahead forecasts, built using ForexChaser.com premium quantitative modeling technique. The resulting numbers are based on mathematical studies and on hours of data-mining in order to provide the most accurate signals. One should note that due to the market’s tendency to be “informationally efficient”, past performances do not necessarily predict future performances, meaning that the actual number might differ from the predicted value.
