Long GBPUSD Trade during the European Session - helped by UK Construction PMI

This Thursday morning Dec. 2nd 2010, during the European trading session about 45 minutes after the London Open there was a live online forex trade signal given in the Profitmongers traderoom. It was tempting to jump in long just before the London open as good momentum had been building for the past 3-4 hours as the Asian trading session came to an end, however this was very dangerous as often when London opens for business there is some sort of reversal as dealers and marketmakers try to fill the orders on their books. Also traders in asia will book their gains and close up shop for the day. The British Pound-US Dollar pair, otherwise known as cable did drop some 45 pips just below the 1.5600 handle. The live trade signal was given to enter the market, buying the GBPUSD pair around 1.5590.

Although the chart looks like it moved instantly, this is a 5 minute chart and some patience was required to allow the price to move up in our favour. Time has a tendancy to seem longer when you are a taking risk, such as when a trader has a highly leveraged position on a forex currency pair in the market. Every effort must be made to remain calm and patient and somewhat detached and unemotional, just stick to your rules and let the trade do what it will, yet at the same time remain attentive to price action and the news, ready to react to any situation which might occur which would require the trader to take action.

Profit was taken when the GBPUSD FX Currency pair reached back over the 1.5600 handle and took out the last swing high at 1.5615, although this was a minor swing, likely there were some stops their from those traders who shorted the pair right at the 8am GMT open, as the 2 doji candle right before this time seemed to provide a good entry. Risk appetite had reemerged after a few weeks of sell-offs so it seemed that there was good potential for more upside. With the stop-loss moved to break-even the trade was risk free and the after a pullback of 10 pips of so the UK Construction PMI numbers came out. Last month this number provided a good move although there were other market forces exerting force at the time, perhaps M&A activity or inter-european government payments. Regardless a small positive deviation again helped the GBP take out the important 1.5650 level which provided resistance yesterday and seems to be a natural level for stops to be clustered. Here is the Construction PMI data:

(UK) NOV PMI CONSTRUCTION: 51.8 V 51.3E- No revisions

The expectations for this number had been lowered quite a bit after last months poor number. In fact the expectation was lower than last months number by -0.2. So although this number was +0.5 above expectations, it was only +0.3 above last months poor number. So it did not seem so great, although with risk appetite in the market, especially since yesterday's 13 year high for Manufacturing PMI, just the fact that the number was not so low as last month was enough to get the GBPUSD to rally another +55 pips. The possibility of price getting close to 1.5700 was high but the way price knocked out 1.5650 with a strong spiky up-bar, it seemed more sensible to book the +75 pips rather than wait for another +20 or +30 more. The last pips are always the most expensive. This proved to be a wise choice as the focus of the market moved to the ECB's Claude Trichet speech after their Interest Rate Announcement the market sold off quite handily. It appeared that Trichet was not giving the verbal messages that the market was expecting, however as he spoke it was reported that the ECB was seen in the market buying peripheral debt. This is the Greek, Irish, Portuguese, Spanish and Italian Bonds whose yeild have gone way up. When the ECB buys these bonds the yield go down and this helps the EURUSD pair go up. The GBPUSD followed in along with this move.