Trade Idea: 2011-5-24 4:05
From what I’ve heard from Pip Diddy, S&P and Fitch downgraded their outlook for Italy and Belgium yesterday. Consequently, this sent the euro trading lower against its counterparts as it fueled speculations that a debt contagion is already spreading to other countries. Yikes!
As if that’s not bad enough, the protests against the government’s budget cuts continue in Spain.
On the technical side of things, I think it’s pretty clear that the pair is a downtrend. For one, it broke the rising trend line support last Friday. And second, the pair has lost for two straight days already, telling me that the market is bearish on it.
As much as I want to jump in right now, I have to be patient. I’m waiting for a pullback between the 38.2% and 61.8% Fibonacci retracement levels.
So what’s gonna be the catalyst? The only X-factor event I see for this week in our forex calendar is the U.S. Preliminary GDP report for the first quarter of 2011. I’m thinking that if it comes in better than expected, we may see a risk rally in the market.
So my plan is to wait for reversal candlestick patterns (e.g., shooting stars, dojis, bearish maruzobu, etc.) before entering. I have no intention of pulling off a set-and-forget move on this setup. Who knows, risk appetite could stay for a while and stop me out.
I’m excited for this trade to materialize. I haven’t had a position in more than a week now, and my account needs some pips! Boo yeah!