GBP/USD: Long At 1.4390 After Hawkish BOE Minutes

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GBP/USD: Long At 1.4390, Correction Likely After Hawkish BOE Minutes

• The Bank's nine rate-setters voted 8-1 to keep interest rates at a record-low 0.5% for the sixth month in a row at their January meeting. Ian McCafferty, one of four external members on the nine-person Monetary Policy Committee, voted to increase rates to 0.75% while other policymakers appeared no closer to raising rates. Before the minutes were released there was speculation that policymaker Ian McCafferty might change his vote for an immediate hike given the ructions in global markets, with sliding oil prices and subdued economic data in Britain.

• Bank of England policymakers expect the recent plunge in oil prices will weigh a bit on British inflation in the coming months but said it remains unclear if the impact would be lasting. The central bank said the fall in oil prices might boost economic growth in Britain and other economies.

• The Bank, in its minutes, sounded largely unconcerned about the market volatility and it welcomed the smooth reaction by US stock markets to the decision by the US Federal Reserve to raise rates for the first time in nearly a decade last month.

• BoE Governor Mark Carney is expected to give fresh guidance on the Bank's outlook for rates in 2016 when he makes his first speech of the year on January 19.

• In our opinion relatively hawkish BOE minutes may be an opportunity to take profit on recent GBP-selling positions and we expect a short-term correction in the GBP/USD. We went long at 1.4390 with the target at 1.4590, below the 14-day exponential moving average. But this strategy is quite risky.

MAJOR PAIRS:

Short-term and long-term trading strategies

It is usually reasonable to divide your portfolio into two parts: the core investment part and the satellite speculative part. The core part is the one you would want to make profit with in the long-term thanks to the long-term trend in price changes. Such an approach is a clear investment as you are bound to keep your position opened for a considerable amount of time in order to realize the profit. The speculative part is quite the contrary. You would open a speculative position with short-term gains in your mind and with the awareness that even though potentially more profitable than investments, speculation is also way more risky. In typical circumstances investments should account for 60-90% of your portfolio, the rest being speculative positions. This way, you may enjoy a possibly higher rate of return than in the case of putting all of your money into investment positions and at the same time you may not have to be afraid of severe losses in the short-term.

How to read these tables?

1. Support/Resistance - three closest important support/resistance levels

2. Position/Trading Idea:
   BUY/SELL - It means we are looking to open
   LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level. LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!

6. Profit/Loss on recently closed position - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.