Forex Signal (Thursday January 12, 2011 7:00am EDT) – UK BOE Interest Rate

Stavro D'Amore

Former FPA Special Consultant

Today we have UK interest rates due. Please see my trade plan below

UK BOE Interest Rate
Forecast: 0.50%
Previous 0.50%
Pair to trade: GBP/USD
Estimated Pips: 50 on Initial Spike

The numbers we will look for:
BUY GBP/USD if we get 0.25%
SELL GBP/USD if we get -0.25%

Economical Impact: Very High (will bring strong volatility )
Typical Result: Good for currency
Occurrence: Released monthly

About our Triggers:
It is unlikely the BOE will hike rates to 0.75%. We will BUY GBP/USD as per my method of trading below.
The same rule will apply if the BOE suddenly decides to lower the rate.
Should the BOE decrease rates, please look for a short term possible SELL of the GBP/USD pair.

If our tradable releases are reached, there is a good expectation that the market will move 60-70 pips within 2 spikes in the first 15 minutes, after news release.

What is it? Why does the market care?
The Bank of England (BOE) decision on short term interest rate. The decision on where to set interest rates depends mostly on growth outlook and inflation . The primary objective of the central bank is to achieve price stability. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency.

A higher than expected rate is positive/bullish for the GBP
A lower than expected rate is negative/bearish for the GBP

Method I use to trade this:
Stavro D’Amore Trading Method

Felix Descriptions
Trading Descriptions

I would recommend spike trading as the best option when there is great uncertainty in the markets; also the liquidity is very good at the moment if you are using an ECN broker.

I will look for a 30% retrace in the original spike before entering a trade.
I will close half my position as soon as I hit the original high point of the first initial spike and place a SL at entry price. My TP level would be just before a resistance level, or if the chart decides to form a level looking at a 15 minute time frame. If my triggers are hit, I will definitely try to run this for over 120 minutes, depending on current market volume and to do this I will look for a choppy volume (if you’re using MT4 you would look for the volume bar tab).

Should there not be a retrace in the original spike, I will wait for a retrace in the second spike, the time frame I will look at on the charts will be set on 5min.

Historical Chart and Data UK Interest Rate Decision

All the best

Stavro D’Amore
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