I’ve got not one, but two forex trade setups on EUR/USD! Did I make the right decision to stop and reverse my bias? Let me know your thoughts!
Original Trade Idea: EUR/USD’s Major Resistance at 1.1400
As I mentioned in my initial EUR/USD trade post, I took advantage of a strong resistance at 1.1400 when I saw that the pair had just bounced from the level. At the time I thought that the divergence in the ECB and the Fed’s monetary policies would be enough to give the bears some momentum.
Unfortunately, over the next couple of days Janet Yellen and her gang got busy with hinting that there won’t be a rate cut this June or anytime soon. Heck, Yellen was even surprisingly bearish in the last FOMC statement! As a result, the pair zoomed past my stop loss and even hit the 1.1600 area.
Account change: -220 pips (-0.25%)
Looking back I probably should have closed my position a lot earlier instead of letting my stop loss get hit. For starters, Yellen’s carefully bearish tone clashes with my initial trading rationale. USD/JPY’s sudden and sharp fall was also a game-changer as it dragged the Greenback lower across the board. I could have just closed the trade and entered once the dust had settled.
Next time I’ll remember this quote from the great Paul Tudor Jones: “Where you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt.”
Stop and reverse: Long EUR/USD
In case you missed my tweet earlier this week, you should know that I have decided to reverse my bias and bought EUR/USD. This time I’m looking at the weekly chart, which is showing a possible double bottom breakout.
Fundamentally, I’m pricing in recent speeches from Yellen and her fellow FOMC officials who have hinted that we probably won’t see a rate hike anytime soon. And with Uncle Sam’s recent economic reports coming in mixed and the labor-related data coming in mostly weak, I’m betting on a weak NFP report to boost the pair from the 1.1400 area.
Here’s a summary of my positions:
Position 1: Long at 1.1596
Position 2: Long at 1.1450
Stop losses at 1.1175
Initial profit target at 1.2200
I’ll be keeping a close watch on this pair during the NFP release, as it could make or break my trade idea. If the NFP disappoints as Forex Gump predicts in his NFP trading guide, then we’ll probably see more dollar selloff and a boost for EUR/USD. If the report prints an upward surprise, however, then I’ll be ready to cut my losses on both positions.
What do you think? Will EUR/USD break above the double bottom pattern or will the 1.1400 handle hold for the pair?