USDX At Major Support: Time to Buy the Dollar? – Trade Update

Trade Update: 2011-7-25 3:02

EUR/USD Hourly Chart

As you can see from the chart I uploaded, after EUR/USD had hit my first profit target, it quickly reversed and rallied to my stop. While I did take half my position off on my first PT, I made a very noobie mistake…

Can you guess what I forgot to do?

I forgot to move the stop on my remaining position to my entry point!!! Talk about being clumsy! As a result, the trade ended up being breakeven instead of a profitable one.
Did I mess this one up. Oh well, lesson learned. Even if I am ahead, I should always remember to keep calm and manage the trade wisely.

In other news, I plan on working on my HLHB system again.While the system isn’t really losing, it hasn’t been generating a lot of signals either. I need to tweak some of its filters to increase its profitability and to get more signals. I’ll update you at the end of the week so stay tuned!

Trade Idea: 2011-7-21 3:16

USDX Daily Chart

As you can see, the U.S. dollar index is once testing the rising trend line that extends all the way to April. Using this as basis, I have reason to believe that the U.S. dollar could end up rising versus other major currencies in the near future.

EUR/USD 4-hour Chart

Since one of the biggest components of the U.S. dollar index is the euro, I’m looking for a way to short EUR/USD. Looking at the 4-hour chart, I saw that Stochastic just hit overbought territory and is testing the previous week high.

I’m not sure if the resistance will hold, but I believe this is a good time to short, especially since price is very near the 1.4300 major psychological level and not to mention that we’re gonna hear EU policymakers report on their plans for Greece.

Earlier today I read a report which said that German Prime Minister Angela Merkel and French President Nicolas Sarkozy came to a compromise for Greece’s bailout. What exactly did they agree on? That’s a secret EU officials won’t tell… yet.

If I remember correctly, Germany had urged that it should be mandatory for private investors to shoulder part of the bailout while France had argued that it should be voluntary. I’m thinking that if the terms regarding the extent to which investors would be involved in doesn’t impress the markets, we may see the euro get sold off. After all, credit rating agencies have warned that forcing investors to take losses would warrant a selective default for Greece.

I know, I know. The U.S. has its own share of debt woes too. However, I heard that policymakers over at Washington seem to be willing to more compromise as President Obama said that they could increase the debt limit temporarily to avoid a default.

In my opinion, there is still to much uncertainty surrounding the second Greek bailout. Perhaps the increased likelihood of the U.S. Congress coming up with a plan to avoid a default would make the dollar a better alternative to the euro.

That being said, I shorted at market (1.4267) hoping to ride the pair’s potential move down (profit target yet to be determined). Of course, what’s a trade without a stop. I’ll consider my trade invalid if price moves 100 pips against me.

Then again, that’s just my opinion. What do you think? Lemme know what your thoughts are through Twitter (@Loonieadventure) and Facebook, or by writing them in the comment box below. Wish me luck!

  • Joshua Pearce Gibson

    I’m 100% confident you’ve answered this question already, but I gotta ask again anyway… what charting package do you use?

    • huck

      Xtick Joshua! :)

      • ryzy

        Hi Huck. Do you maybe use it on Mac OSX?

        • huck

          I use it on Windows!

  • wilson

    Why don’t you guys focus on where to buy the euro instead of looking for opportunity to short ??? Look at where the euro is! This scenario had played out for the upteem time: Pair drop 100 pips only to rebounce 200 pips!!  The market simply do not want the US$ and finds any kind of reason just to buy up the euro!!!

    • huck

      It was a surprise move from the EU.. I doubt anyone knew in advance what was going to happen! Heh. It’s a good thing I stuck to my risk management rules though… I closed half at 1.4150 and walked away with a small profit! :)

      • wilson

        It was not a surprise move from EU.Did you not notice that the pair have been creeping up north days before the summit in anticipation of a deal to bail out greece? In fact, the surprise move was the “drop” due to a partial default for greece and you were lucky to walk away with a small profit.

  • Pascal

    Hello there. Thank You for sharing an idea.I’m a newbie and I love it here.You guys are doing a great job!!! So, my opinion is, that this trade could go either direction at this point eur/usd is in the middle of a Chanel pattern and even usdx looks more like an triangle. Last, but not least US debt concerns are growing at such a rate it wouldn’t surprise me to see a sell off before weekend. That entry was bit risky, in my opinion, but crossover is already in place since you shorted and it seems to go the right direction.I Hope it’s yours Huck! Now it’s time to crack on with Sumer school/10th grade. :-)

    • Joshua Pearce Gibson

      EU leaders are currently holding a summit as I write(type) this. The major item on the table is a second Greek bailout. This new bailout is probably going to have a selective default attached to it. Just a heads up.

  • Canarywharf

    Wow – Eurozone announcement has killed this move.  Hope you locked in your early profits!

    • huck

      Yep, I have closed half at 1.4150. I’m good.

  • kingjoe

    Great move Huck.  Enjoy the ride.