Another UK Bank Bailout, Another Sterling Collapse

The FTSE recovered from a new intra-day low as traders hammered Sterling. Gold failed to re-take the 21-day moving average and eased back below $930.

“No meaningful data out today so it should be a quiet start to the day,” I thought as I planned a much-needed gym session. Hah! I returned to find that Sterling had been hammered into the ground, supposedly on the shock, horror revelation that UK taxpayers were going to bail out Lloyds. I thought there were a few hints of this last week. Whatever, I missed the trade of the day and didn’t fancy being the last man in.

In retrospect, Friday was a terrible day for dealing. Forget the winning trades, the ones that stuck in my throat this morning were a purchase of gold and a sale of EURGBP, both carried over the weekend.

The gold purchase was premature, paying $942 and $935 on the rationale that gold had bounced off support and poor equity markets would drive the price back to the higher levels. However, the market doesn’t seem ready for that so I trimmed my position from £3 to a token £1. I closed out £1 on Friday for a £70 profit; today’s sale was for a loss of £70. I’m keeping the remaining £1 bet because I can cope with the daily fluctuations on that size. Will we see a re-test of support at $900? I certainly want to see the 21-day moving average at $945 conquered before getting too carried away.

Friday’s sell bet on EURGBP was a classic; I thought I’d sold the break on a new low and ended up selling close to the lows. That was a reasonable trading ‘error’, but the real mistake was continuing to run the damned bet. The £1 bet size was manageable, but by the time I’d stopped out this morning it was an irritating £100 loss. Luckily I viewed the break of £0.90 as significant and closed out pretty sharpish at £0.9003 before hitting the gym-the price currently stands at £0.9168.

Later, I went £3 long of the same currency pair, but wasn’t keen on the overbought indicators so took a small turn and jumped ship. I hate to say this, but I wonder if we’re going to see a run in EURGBP. Firstly, today’s action has seen the price blast through its 50-day moving average at £0.9054. Secondly, the move pierced the daily downtrend line from December’s high. But a word of caution; the RSI shows a very overbought position on all but the daily chart so there ought to be a decent pullback over the next day or so.

I made a few quid on a long FTSE bet, but I still prefer to run a tight stop on this one. Sure, I reckon we’re overdue a rally, but at the moment there’s a marked reluctance to give shares a real boost. I don’t believe we’ve bottomed properly yet and I think a test of the 2003 lows is becoming more likely. Until then I’ll keep dipping my toe in the equity market, but I’ll be lucky, rather than good, to get much of a run out of it.

Subscribe by RSS Subscribe by Email