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Wednesday, November 08, 2006

Closing Longer Term GBP/USD Trade:

I have decided to close out our longer-term short on GBP/USD. The current market price is 1.9065, so if you close at that rate you will be taking a -25 pip loss per lot.

The reason I am closing is for purely fundamental reasons. We have the Bank of England interest rate decision coming on Thursday. They are expected to raise interest rates to 5.00%, which means GBP/USD will probably drift higher as traders position for that announcement.

Also, reports are coming in that the Democrats have won control of the House of Representatives. This means political gridlock if the Republicans maintain control of the Senate. If the Democrats take control of the Senate, then we'll see tight fiscal policy for the next few years in the US. Both cases mean a weaker Greenback which would've gone against our trade.

So, the trade is off. At one point we were +85 pips per lot, but the trade went against us and went into the red. A part of me sees this as a failed trade as I let a profitable trade turn into a losing trade, but another part of me sees it as a success as we stuck to my original analysis of this pair being over bought. For those of you who know my trading style, know that I think fundies over rule technicals, and this was the case.

There will be no signals tonight. I will post signals tomorrow night as major economic news releases will resume on Thursday.

Have a great night! (or morning for all of my friends in the opposite hemisphere) :)

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