EUR/USD: Has the Trend Reversed?

Trade Closed: 2011-4-19 3:09

EUR/USD 1-hour Chart

What goes up, must come down. I think Alicia Keys wasn’t just singin’ about cheating ex-boyfriends in her song Karma. Looking at yesterday’s sharp euro sell-off, it seems to me that traders are tryin’ and desirin’ to go back to the dollar!

Fundamentally, it seems that traders have finally turned their risk aversion switch back on again. Last Friday, the euro fell on news that Greece would most likely need to restructure its debt. This has been a long-time fear of the market, and now that it has hit the limelight, traders finding ways to cover their long euro positions!

Then, yesterday, the euro fell again when Standard & Poor, a credit rating agency decided to downgrade the U.S. debt outlook to negative from stable.

Ouchies. That’s like getting two “It’s not you, it’s me” from boys in just one weekend! :(

On the technical side of things, it looks like EUR/USD still has room to move up with Stochastic still showing upward momentum. And so, my plan is to wait for a retracement and short the pair when it’s already overbought and signs of exhaustion start showing. I’m gonna be on my tippy toes for reversal candlestick patterns between the 61.8% and 38.2% Fibonacci retracement levels.

So there. Based on my fundamental and technical view of the pair, I am looking for ways to go short. I don’t exactly know when, but I will pull the trigger once if price shows resistance between the 38.2% and 61.8% Fibonacci retracement levels. Hopefully, price manages to get up to my desired entry point and give me a chance to bag some oh-so-lovely pips!

And as always, if you’ve got any questions or comments, you can hit me up here or in Facebook or Twitter!

  • Dec10

    There goes your reversal. Forget about fundamental! This is not the first time the pair behave this way: Recovering strongly after sharp drop despite unfavourable fundamental. Focus on looking for support to buy instead of trying to find a top to short is a wiser option as least for now.

  • Spacen

    Remember that interest rates are playing on peoples minds a lot these days. We are also at the level (roundabouts) where the greece crisis helped move the EUR/USD down last year. It would seem that the EUR/USD might be due for a correction lower, but money appears to be moving towards the best interest rates now – and that might have some effects on the yen pairs in the coming months too.

  • Londoner

    What’s your entry signal?
    I am surprised the Euro is recovering given the fundamentals have not changed at all – today’s news is that Greece is likely to default (aka “restructuring its debts”), which the UK’s Daily Telegraph -a heavyweight paper – this evening reports the Greek government has now tacitly accepted. This means either another bail-out or renegotiating the austerity package imposed, with the possibility of Bond holders taking the proverbial haircut. There’s every chance this contagion spreading to Spain, as interest rates on its Bonds rose today.
    Given this, I am long-term pessimistic over the Euro – but unsure why this isn’t reflected in the EUR/USD rates at present.

  • Joe

    Posting comment.

  • Alex

    unfortunately I entered at 14355 and with a S/L at 1.4520 I took a -165 pips.

  • RestInPips

    Hi Huck,
    I would be careful about the trend reversal at this precise moment. It is perfectly OK to set up the trade like you suggest in the given time frame. Despite this, there is no evidence of the major trend is undergoing a reversal (check out daily charts and apply SMA 50)

    Good Luck,

    Rest

  • Huck

    @Rest Okay :) I Pinky promise I won’t jump in until I see reversal patterns. Thank you!

  • RestInPips

    Hi Huck,
    I would be careful about the trend reversal at this precise moment. It is perfectly OK to set up the trade like you suggest in the given time frame. Despite this, there is no evidence of the major trend is undergoing a reversal (check out daily charts and apply SMA 50)

    Good Luck,

    Rest

  • Huck

    @Rest Okay :) I Pinky promise I won’t jump in until I see reversal patterns. Thank you!