(This is an excerpt from an article I originally published on Seeking Alpha on July 29, 2012. Click here to read the entire piece.)
I started with a bullish strategy to trade the British pound against the U.S. dollar (FXB) after fiscal and monetary authorities rallied to airlift more liquidity into the economy. It worked well but required accumulating into selling on GBP/USD and then selling quickly into large but brief rallies into resistance provided by the 50-day moving average (DMA). After several flourishes, I finally decided to switch to a bearish strategy that seemed more amenable to managing risk in the apparent trading range. Of course, after that, GBP/USD rallied further into resistance at the 200DMA. Fortunately, the currency pair promptly sold off from there to deliver another profitable exit.
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One key to how this latest drama unfolds is the direction of the U.S. dollar index (UUP). {snip}
Source for charts: FreeStockCharts.com
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Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on July 29, 2012. Click here to read the entire piece.)
Full disclosure: net short British pound