A Simple Fib Setup on EUR/USD – No Trade

No Trade: 2013-05-15 5:42 ET

No luck on this go around as the pair didn’t retrace quite enough to trigger my first set of orders at the 38% Fibonacci area. With EUR/USD now testing the 1.2900, I’ve decided to close it down and look for a new opportunity this week.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

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The chart image above says it all as US Dollar strength continued through the Tuesday session without the full retracement I needed to at least hit my first entry level. With the pair now testing the next psychological handle, 1.2900, I’ve decided to close all open orders to short EUR/USD at 1.3035 and 1.3095. No trade.

In retrospect, I should have taken into consideration that there were many catalysts for US Dollar strength, especially with speculation that the Fed may be considering in starting a plan to taper off the bond buying program. Overall, I got the directional bias right, but it looks like I still have issues on identifying when to jump in at market and when to wait for a better price. Besides that, everything was pretty textbook and I wouldn’t change a thing.

Well, the week is still kinda young, and I’m watching the price action on Cable as the UK’s jobs numbers came out better than expected a bit earlier in today’s European session. This intraday rally might be an opportunity to play the bigger theme of Greenback strength. Stay tuned by following me on Twitter and Facebook for observations and new ideas!

Trade Idea: 2013-05-14 5:34 ET

Good morning forex friends! After a bit of a bad run over the past few weeks, I took a quick break from trading to reset and refocus for this week. Looks like I missed a strong drop in EUR/USD on Thursday and Friday, but I might get a chance to play a retracement soon!

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I decided to warm up after my brief break with a simple Fibonacci setup on the 60 minute EUR/USD chart. It’s a textbook setup after broad market sentiment shifted in favor of the Greenback last week on positive US initial claims data, as well as support sparked by positive US retail sales this week.

This week’s forex calendar is laced with a few tier one reports from both the euro zone and the US, but none are top tier so I don’t expect extended moves without a huge surprise. Of course, with the focus back on USD strength, more positive US data this week could extend the shift in sentiment.

Technically, we can see the potential sell area coincides with the minor resistance area of 1.3050, which adds fuel to the fire as to why it is probable we’ll see interest in that area. But rather than going short at that psychological level, I’ll scale in at the 38% and 61% Fib levels to create a position with a average entry price at the 50% Fib. I do this incase we don’t see a retracement back all the way up; I still get to catch downward pressure if I get triggered at the 38% Fib. My stop will be above the Fibonacci area, while I target recent swing lows. Here’s what I am going to do:

Short quarter position EUR/USD at 1.3035, stop at 1.3135, profit target at 1.2940

Short quarter position EUR/USD at 1.3095, stop at 1.3135, profit target at 1.2940

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

With this trade structure, and if both positions are entered, my max risk is 0.50%, with a max potential return-on-risk of about 1.78:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook.

  • Reggie

    short and sweet. good job and good luck.

  • liliku

    that is good idea, i got+ 20 pips from eur/usd and + 66 pips from nzd /usd and still running. Thanks so much. Ihave visited your discretionanl trading and I get confuse of understanding averge true range. Please asked babypipschool to give that indicator. well done sir