Taking another shot on this EUR/USD range, this time near the top. Will this week’s events send the market up there & will forex sellers jump in?
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Up ahead, we’ve got four central bank events that are likely to spark big volatility, and the most notable of the group is the FOMC monetary policy meeting. The market isn’t expecting another rate cut (sentiment which may already be priced in), so the thing to watch is the Fed’s outlook on the economy and any hints for future interest rate changes.
Of course, I’m not smart enough to know what’s going to happen with that event or the Greenback in the next few days, but I think no matter what happens, the U.S. dollar is still a more attractive currency vs. the euro because of economic and monetary policy divergences in favor of the U.S.
So, I’m still looking to buy Greenbacks against the euro, but with so many top tier events happening this week, I’m going with another conservative entry like my EUR/CAD short trade. This time, I’m going to play near the top of the EUR/USD range (1.0600 – 1.1500) that’s been going on since the beginning of 2015.
Starting with the recent swing high, I’ll be scaling in short up to the major psychological level, with a wide stop of around one weekly ATR. It’s a bit far from current levels, but we all know that EUR/USD can MOVE after last week’s ECB meeting. My max profit target is the bottom of the big range, but I’ll likely take profit somewhere in-between, depending on what the market gives me. Here’s what I’m doing:
Short half position EUR/USD at 1.1350, max stop at 1.1725, max profit target at 1.0600
Short half position EUR/USD at 1.1500, max stop at 1.1725, max profit target at 1.0600
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 3:1. 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!