Trade Closed: 2012-01-13 13:46 ET
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The big news of the day is rumors of an impending series of European sovereign debt downgrades by S&P rating agency. According to Reuters, government sources said “S&P would cut a number of the currency bloc’s sovereigns, making an announcement after New York markets close at 4 pm.” Read more about the event here.
The big blow to the euro today was a positive boost for my short EUR/USD position, turning my swing trade into a day trade. Less than 24 hours after entering the trade, I decided to close as the pair tested 1.27. My line of thinking as I closed was that the S&P downgrades were still speculation, the exact details who would get downgraded are still unknown, and since it wouldn’t be announced until after the markets closed, a less pessimistic announcement as perceived by the markets may blow away that strong move lower. That’s a risk I didn’t want to take so I closed my trade at market (1.2696).
Total: +132 pips/ +1.05% gain
After a little bit of reflection, I think the one thing I could have done better was to wait for the market to give a clear signal that the sell off was exhausted. We got that in the form of a hammerish type bar at the strong support area. The stochastic indicator also signaled that market was potentially exhausted. Had I waited for that signal, I probably could have squeezed another 10 or 20 pips from the move. Despite not executing to full potential, it was a good setup and it looks like Friday the 13th brought me good luck and a great way to start the weekend.
Trade Idea: 2012-01-12 15:39 ET
With the ECB interest rate decision out of the way, I’m taking another stab at shorting EUR/USD today as it looks like I can get in at better price and a nice looking technical setup. In the one hour chart above, we can see the market popped higher today after a positive Spanish bond auction and comments from ECB President Mario Draghi that there are “tentative signs” that the European economy is stabilizing.
To me, it’s what a leader is suppose to say to avoid sparking panic selling, so I’ll take it with a grain of salt and remember that situation stays the same as growth looks to slow with impending austerity measures to hit the Eurozone area. But it was enough to spark some buying, possibly a short covering.
Technically, we can see the pair found resistance at the Fibs I drew this week, as well as the 200 moving average on the one hour chart. Also, stochastic is indicating that conditions are oversold, and finally, we can see a doji in that potential resistance area indicating that buy and sell orders have balanced out. I think this will appear to euro bears as a great opportunity to jump back in the longer term down trend.
So, I look to short in this area, with a wide stop above Fib area and have a tentative target at this week’s low. Here’s what I am doing:
As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!