Trade Idea: 2012-7-12 00:05
Since I’m a little dry on trade ideas this week, I’m going to try out a setup pointed by the great Big Pippin. I normally don’t do counter-trend plays on the daily but this setup just looks too sweet.
As you can see, the pair is currently hovering around the .9800 major psychological level after forming a doji. Technically speaking it isn’t a real doji since it has a body, but it does have long upper and lower shadows. This shows that traders were indecisive, which could mean that a reversal could happen soon.
I’m ultimately aiming for .9500, but since the level is about 300 pips away, I’ll be sure to manage my position carefully. This means I may add or reduce my position depending on the market environment. As for my stop, I’ll be placing it 100 pips or so away, above the .9900 major psychological handle.
Pip Diddy reported that the FOMC minutes hinted that the Fed is less inclined to pull the trigger on another round of quantitative easing. I thought that this should have spurred a wave of dollar-buying. However, a look at the daily chart of USDX reveals that the currency barely moved. Heck, it wasn’t even able to close above its previous high.
I’ve read that despite the lack of urgency from FOMC members, QE3 is still not off the table. And so, I think that the dollar could get sold off when disappointing reports roll in as they could convince the Fed that more stimulus is needed.
To recap, here’s my plan: