In this trading example we will look at the trade which was taken on the GBP versus the USD on the 14th of March 2016. Welcome to a quick trade example. This trade has been taken by Jarratt‘s FX team in London and recorded to demonstrate exactly how they make money from fundamentals and news flows on a daily basis. The trade was taken on a GBP/USD on the 14th of March 2016. The GBP has rallied 600 pips against the USD and there was no fundamental basis for this rally. We have seen a lot of downside in February and early March in Cable and that was mainly associated with the BREXIT concerns. The referendum will take place in June and is looking at about 50/50 on the polls at the moment for the UK to leave EU, that is going to have detrimental effect on the UK economy and that is why we saw a lot of downside leading into this rally. The market got in the mood of selling USD off which lead to seeing Cable rallying up. Because there was no fundamental justification for this rally it simply provided us with a very good opportunity to get short. Leading into the week of FOMC meeting we sold GBP/USD and knew that there probably would be weakness in the pair heading into the FOMC meeting, due to the core inflation picking up in the US with a good chance of FOMC taking note of that and prepare market for the hike later in the year. Certainly the strength in the USD was seen across the board and the GBP was one of the biggest movers to the downside, leading into the FOMC. I moved the stop loss to just above the 1,42 handle ahead of the meeting. When Yellen and her colleagues came out and were a lot less hawkish even dovish, more than the market expected, we saw an immediate sell-off in the USD and this trade was closed manually. We did not take as many pips as we could have, however had the FOMC being hawkish we would have seen a further downside and probably would have taken it off around 1,40 handle, yet still managed to take nearly 200 pips – to be precise 193 and a cool $6,300 in the trading account. That was a quick trading example of what we do here on a daily basis at Jarratt Davis.

• published: 01 May 2016
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