Not Yet Done with the EURUSD! – Orders Closed

Closed Open Orders: 2010-05-18 22:48

PoD Chart

Oh Phooey! I missed out on the retracement on the EURUSD! The euro is starting to look like a fur coat in the middle of summer – nobody wants it!

It seems that traders are still scared and don’t want to be caught up in long EUR moves. It just keeps falling and falling and falling! I read Pip Diddy‘s roundup today, and it seems that risk aversion got a spark from news that Germany wasn’t going to allow naked short selling in equity markets anymore.

Now, I’m not too familiar with this term, but from what I can read, it seems that traders took this as another sign to get their money out of European assets, as both the euro and European equity markets took a hit.

On the technical side of things, I didn’t notice that a rising wedge had been forming on the 1-hour chart. I could have taken a short trade on the break, which would have also been a high probability trade since the euro, for the lack of a better word, SUCKS right now. I’ll just be looking for more opportunities to short it later on retracements… Hopefully.

Trade Idea: 2010-05-17 23:35

PoD Chart

I’ve been reading about from Pip Diddy’s blog about the possibility of a “short squeeze” so I’ll be more conservative with my entry point.

I guess you could say I learned my lesson when I got burned on my last trade since I went against the trend. This time around, I’ll be going with the flow and riding the EURUSD downtrend. I drew the Fibonacci tool on the latest swing move on the 4-hour chart and noticed that the area of interest around 1.2600 lines up with the 50% retracement level. Notice how the price consolidated around that area for a while last week? Maybe that former support level could serve as resistance now.

Fundamentally, I’m still inclined to believe that investors and currency traders remain bearish on the euro. Although a plan has been written up and implemented, most believe that it is simply a band-aid solution. Paying debt with more debt just delays the situation and does not really fix the euro zone‘s underlying fundamental problems.

Now, I know my sell order is a bit far off, but the surplus of economic data from both the US and euro zone coming out in the next couple of days could take price there. Specifically, I’m referring to Germany’s ZEW economic sentiment survey, the US consumer price index and the Philadelphia manufacturing index. Off-target results on these reports could provide the volatility I need to get triggered.

I set a wide stop for this trade because a possible short squeeze could push the price much higher and I want to give this swing trade more breathing room. I placed my first profit target at the recent low of 1.2235 and my second profit target at the psychological 1.2000 handle.

Here’s what I’m gonna do:

Short EURUSD at 1.2600, TP1 at 1.2235, TP2 at 1.2000, stop loss at 1.2800.

I don’t really follow pageants, but I just happened to stumble across some headlines about the recent Miss USA contest. Hopefully, I can bounce back as gracefully as Miss Rima Fakih, who tripped on her gown but still was able to win the Miss USA crown! Way to go girl!

Thanks for reading my blog! You can also see my trades and blog posts over at MeetPips.com!

  • Dainius

    I think you trading the hard way by trying to predict market turns, unless you have a crystal ball witch i doubt you do. Instead go along with it, wait for confirmation before you commit to any trade. But that just me talking, what do i know? :) I’m short USD/CAD as oil bounces back this pair will go down few hundred points. Good luck everyone.

  • Dainius

    I think you trading the hard way by trying to predict market turns, unless you have a crystal ball witch i doubt you do. Instead go along with it, wait for confirmation before you commit to any trade. But that just me talking, what do i know? :) I’m short USD/CAD as oil bounces back this pair will go down few hundred points. Good luck everyone.

  • KarlMonster

    “Oh Phooey!” ?

    Nonsense. Don’t play the “I could have done X” game in FOREX. Second guessing is a bad business in an market where your steps must be measured.

    I was fortunate enough to catch the EUR/USD turnaround. It satisfied my trading criteria, as it had a bullish stochastic crossover on several different timescales. I have long been expecting EUR/USD to float higher after the last several punishing days.

    Truly it was a moment that I would have mentally kicked myself for missing. Since I caught it this time, hopefully I will be better at keeping those thoughts out of my trading.

    Nah!

  • KarlMonster

    OK, I wrote the above while I was trying to figure out how/why you chose that entry point, and whether your short had been triggered. It has not.

    My main question about your trade idea goes like this:
    If you were hoping for a TP2 of 1.2000, why choose an entry point so far out of the channel?

    It strikes me that EUR/USD would have had to make a tremendous sideways move just to trigger entry, making TP2 unrealistic in the short term.

  • KarlMonster

    “Oh Phooey!” ?

    Nonsense. Don’t play the “I could have done X” game in FOREX. Second guessing is a bad business in an market where your steps must be measured.

    I was fortunate enough to catch the EUR/USD turnaround. It satisfied my trading criteria, as it had a bullish stochastic crossover on several different timescales. I have long been expecting EUR/USD to float higher after the last several punishing days.

    Truly it was a moment that I would have mentally kicked myself for missing. Since I caught it this time, hopefully I will be better at keeping those thoughts out of my trading.

    Nah!

  • KarlMonster

    OK, I wrote the above while I was trying to figure out how/why you chose that entry point, and whether your short had been triggered. It has not.

    My main question about your trade idea goes like this:
    If you were hoping for a TP2 of 1.2000, why choose an entry point so far out of the channel?

    It strikes me that EUR/USD would have had to make a tremendous sideways move just to trigger entry, making TP2 unrealistic in the short term.

  • Huck

    Hey Dainus, I guess I was just hoping to short the pair at a much better price by going for the retracement. Unfortunately, it didn’t work out this time. Good luck on your trade though!

  • Huck

    Thanks for the feedback KarlMonster. You’re right, my short order at 1.2600 didn’t get triggered. Of course I tried my best to combine my fundamental and technical analysis to come up with that trade idea so I wasn’t really just guessing. It’s just too bad that risk aversion didn’t allow the EURUSD to retrace that day and instead pushed it to a new low. By then, my trade setup using the Fibonacci tool was already invalidated since there was a new swing low.

    I set my second profit target at the 1.2000 mark because, aside from being a psychological level, the pair previously consolidated in that area a long time ago.

    I might have to check other technical indicators for more confirmation for my next trades but for now, I’ll stick with Fibonacci and good ole support and resistance levels!

  • Huck

    Hey Dainus, I guess I was just hoping to short the pair at a much better price by going for the retracement. Unfortunately, it didn’t work out this time. Good luck on your trade though!

  • Huck

    Thanks for the feedback KarlMonster. You’re right, my short order at 1.2600 didn’t get triggered. Of course I tried my best to combine my fundamental and technical analysis to come up with that trade idea so I wasn’t really just guessing. It’s just too bad that risk aversion didn’t allow the EURUSD to retrace that day and instead pushed it to a new low. By then, my trade setup using the Fibonacci tool was already invalidated since there was a new swing low.

    I set my second profit target at the 1.2000 mark because, aside from being a psychological level, the pair previously consolidated in that area a long time ago.

    I might have to check other technical indicators for more confirmation for my next trades but for now, I’ll stick with Fibonacci and good ole support and resistance levels!