GBPUSD—pullback

My long position from 1.5406 profit-stopped out overnight for +179 pips. So my decision to take some profits off the table Friday at +304 pips made sense since that was a resistance level I'd previously identified and at which the pair was stalling. 1.5729 proved to be tough resistance. This makes sense when you consider that 1.5730 was a .618 retracement of the move down from1.5998 to 1.5297.

Currently, at 9:50 AM EST the pair has touched a low of 1.5554. It may be heading back to test 1.5539, 1.5449, and 1.5339 and ultimately the very strong 1.5291/5194. If the latter doesn't hold then a drop back to 1.50 is possible. Should Cable successfully retest any of those support levels and head up again it will find resistance at 1.5729 and then 1.5998 (the August 6th high). The key to trading this pair today is to watch momentum carefully on the short-term charts at those levels and then try a long, if momentum looks good, or a short if momentum seems to falter. In either case you'd want a tight stop. I'll be watching this pair today and may post again on it.

Here's the daily chart:

© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.