Trade Recommendation - Sell GBP/USD limit @ 1.6830-1.6840 Target 1.6770, 1.6750 Stop loss 1.6865

Caution: In case the retail sales data for the month of march exceeds expectations of 3.8% yer over year by big margin the above mentioned trade should be squared off immediately

GBP/USD - Long positions Over stretched

  1. General Consensus in markets is that Bank of England would be the first major central bank and second G-10 central bank to raise interest rates after Royal bank of New Zealand did so on past two occasions
  2. Thus markets have turned bullish over GBP and long positions appear to be overstretched. This means that a slight miss in Retail sales data is enough to see about 100 odd pip correction in GBP/USD pair
  3. Despite being overstretched, I feel the pair would not register a big fall mainly because larger mood in the market is still about caution over rally in GBP/USD
  4. Till the time skeptics continue to challenge the rally in GBP/USD pair, corrections would not be significant. One can consider 1.66 and may be 1.6480 as floors for GBP/USD in short run
  5. In the end I still believe that a currency with massive current account deficit would eventually weaken. Though economic theories are to kept in a drawer eventually they work
  6. Till then 1.6480 and 1.6960 can be considered as a broader range for GBP/USD pair
  7. As for today, the above mentioned trade appears attractive opportunity


Technical Developments

GBP/USD 4-hour chart

  1. Rising Trend line Support levels  - 1.6777, 1.6700
  2. ST indicator support  - 1.6760
  3. Immediate resistance  - 1.6842
  4. RSI in downtrend, indicates further fall in GBP/USD pair

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Comment by Omkar Godbole on April 25, 2014 at 8:50am

Sell entry triggered @ 1.6830. Short position can be held as Retail sales did beat market expectation but previous month's reading was revised lower. More importantly GBP/USD pair has declined to rise on strong retail sales as it did in past couple of occassions


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