Trade idea: 2013-2-22 1:24 EST
One thing you should know about me is that I’m a HUGE fan of retracment plays. When I saw this setup on EUR/USD, I immediately fell in love with it and I just HAD to take it.
On the hourly time frame, you can see that the pair is starting to retrace some of its losses after making a new monthly low. I think the pull back isn’t done yet, so I’m going to be a little bit more patient and wait for price to move up even higher.
I’m closely watching the area around the 61.8% Fibonacci retracment level as price has previously found support there. If reversal candlestick patterns materialize, I’m going to pull the trigger and get in on the overall downtrend.
Fundamentally, I think my trade makes sense. For one, the most recent FOMC Meeting Minutes revealed that the Federal Reserve could possibly change its open-ended quantitative easing program in its March meeting.
Apparently, some voting members think that the monetary policy has been too loose, and that the central bank should reconsider its stimulus strategy. Forex Gump did an excellent analysis of the FOMC minutes in his latest blog post.
Another important issue that could negatively affect EUR/USD is the upcoming Italian parliamentary elections. If former prime minister Silvio Berlusconi ends up winning (a real possibility since public polls show that the incumbent ruling party only has a 3.5% lead), traders could start selling EUR/USD again.
To recap, here’s my game plan:
Sell EUR/USD at 1.3335. Stop at 1.3400 (near the previous swing high). PT1: 1.3170 (swing low), PT2: to be determined. Risk disclosure.