Last Friday, Pound unexpectedly took a big knock in New York session and closed almost 130 points down from the day's high.
After betting on divergence in monetary policies with Euro-area, that kept British Pound well bid throughout the weekend, traders scaled back their position in favor of Dollar. A rate hike from US Federal Reserve is almost a done deal, unless anything big hits economy (both US and world) or financial markets (like Chinese devaluation of Yuan back in August).
Naturally traders, scaled back their positions in favor of Dollar and Pound seemed at quite a high and lucrative. With Friday's drop marking the end of recent correction in Pound/Dollar from 1.505 area, the pair seems to be ready to test the channel floor, which makes sense in light of the coming hike.
Moreover, traders are expecting Bank of England (BOE) to sound dovish in its December meeting.
Trade idea
- Sell GBP/USD in a bid for a touchdown at channel floor, which has remained in place since June this year.
- If touchdown do happen, the pair might reach as low as 1.495 area. Area around 1.523 is good to place stop loss. Pound is currently trading at 1.516 against Dollar.
