Trade Idea: 2011-01-13 02-13
Boy is it good to be back! But just because I miss the thrill of being in on the action on the charts doesn’t mean I’ll go head over heels for the first setup I see. If there’s anything I’ve learned in my three-week break on a tropical island other than efficiently applying sun block on my back, it is that good things come to those who wait. Let’s see if the same principle will apply on EUR/USD!
When I looked at the 4-hour chart of EUR/USD, I noticed that price has retraced a large portion of its down move last week. The first thing that came into my mind was SELL THAT RALLY! The overall trend is downwards and the Stochastic show that the pair severely overbought. But I didn’t just spend my holidays getting a tan. I did some reflecting and realized how impulsive I get sometimes.
The old me would’ve probably clicked SELL immediately, but it’s a new year and I made a promise to myself that I’m going to wait for candlestick confirmation as much as I can before taking a trade. In this case, I’m looking to short the pair around the 1.3200 region IF I see reversal patterns like dojis, bearish engulfing candles, shooting stars, etc.
I’m also keeping my pinky promise to be more careful with my fundamental analysis so I’ll take my time in getting a better feel of market sentiment first.
The event risk is high with the U.S.’s trade balance report for November, initial jobless claims for the previous week, and the PPI for December on tap. If risk appetite continues to dictate price action today, better-than-expected economic reports could send the pair higher.
However, if we see the market return to old school fundamentals, positive figures may just convince traders to root for the dollar. Not to mention that there’s also the ECB interest rate announcement and the Spanish bond auction that I have to keep tabs on.
For now, I’m going to be patient and see how price moves on data and, assuming it gets there, how it reacts to the 61.8% Fibonacci retracement level… Stay tuned!