Trade Closed: 2013-11-25 10:00 ET
I got the pullback that I was looking for but the story quickly changed for the euro thanks to Draghi and a positive surprise on German data. With the market ticking lower a bit to start the week, I decided to get outta this trade quickly!
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
As mentioned in the chart review above, it was a positive surprise to the German IFO data and Draghi denying that the ECB would implement negative deposit rates that pushed the pair higher in the morning European session and during the Friday US session, the pair carried higher on positive risk sentiment. With the pair pretty close to my stop, I decided to hold it into the weekend because my R:R at that point made it worth holding on to.
Today, we saw a broad USD rally thanks to the nuclear limits set in the deal between the US and Iran, and a bit more jawboning from the ECB member Hansson that they are ready to cut rates. Now with US pending home sales (which has been surprising to the downside) on the way, I decided to close with a very small loss at market (1.3525).
Total: -60 pips/ -0.30% loss
In retrospect, I wouldn’t do anything differently except for closing right after the positive surprise from German IFO data. At the time, I thought the market would quickly refocus back on the possibility of negative deposit rates, that is until Draghi started jawboning. But by then the market was already near my stop. Besides that, it was a clean setup in which the market drivers quickly changed back in favor of the euro; the currency market is just quirky like that.
Well, the week is young and I am looking for a new trade. I’m currently watching GBP/USD and USD/CHF as they are trending, but I’m gonna be cautious because this is a holiday week in the US, and data is light this week. If I come up with anything, stay tuned by following me on Twitter and Facebook!
Trade Idea: 2013-11-21 5:05 ET
Good morning! Thanks to talks of possibly moving to negative interest rates from the ECB, the euro was slammed lower against its counter parts. Is there a selling opportunity in EUR/USD?
For today’s session, I’m gonna get into a short EUR/USD if I see a pull back. On the one hour chart above, we can see the market broken below the rising trendline after a report came out that the ECB was considering negative deposit rates to help support the European economy. I’m not sure how that would affect the economy if implemented, but it looks like traders are betting that it won’t be good for the euro if it was. Also, we got European PMI data today and it was not pretty with only German Flash Services PMI printing a better-than-expected read.
My entry order is around the broken support area from back in Nov. 4th and 5th; a little bit aggressive, but with pops like this, retracements can be a bit shallow. My stop will be wide, about have the weekly average true range, and my target will be the previous swing low seen back in Nov. 7th. Here’s what I am doing:
Short half position EUR/USD at 1.3465, stop at 1.3565, profit target at 1.3300
I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.65:1. 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!