I’m locking in profits ahead of the ECB’s event! Here’s my plan for this forex trade setup that I’m working on.
A couple of weeks back we shorted EUR/USD at 1.0725 after the FOMC meeting minutes hinted at a December rate hike. We compared the Fed’s plans to the ECB, which was hinting at further QE back then. But with the ECB about to disclose its actual monetary policy decision, I’m limiting my risk and adjusting my stops.
I decided to move my stop losses to 1.0650, which is not only above the 100 and 200 SMAs, but is also above a falling channel resistance on the 1-hour time frame. I figured this could give enough room in case we see a spike in volatility around the ECB’s press decision and press conference.
Fundamentally I’m still expecting the divergence between the ECB and Fed’s stances to weigh on EUR/USD. However, there might be a chance that we’ll see a sell-the-rumors-buy-the-news scenario in case Mario Draghi and his gang do decide to announce more stimulus today. In this case I’d rather have my current trade get stopped at adjusted levels and just look for another entry price.
Right now my trade is up by around 150 pips but I’m only locking in 75 pips to allow some breathing room for the pair. If EUR/USD does react negatively to the ECB event, then I might also consider adding to my position to maximize the move. My fingers are crossed for EUR/USD to make new lows!
What do you think of this plan? Or do you have any trading plans/adjustments in preparation for the ECB’s decision today? Don’t hesitate to share!