No Trade: 2011-11-23 14:10 ET
Baaaahhhh!! Another trade missed as the market pushed up a bit higher before traders began dumping euros at the start of the Tokyo session.
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I had hoped that the weak attempt to spark confidence in Europe by the IMF announcement for a credit line program would spark more of a retracement in EUR/USD. Unfortunately for both me and the euro, traders pretty much brushed this off quickly and when Tokyo opened, it was euro selling time. It also didn’t help that European manufacturing and services data continues to print weak numbers, and the cherry on top is that European sovereign debt continues to have trouble to find buyers, with a surprisingly bad German bund auction sparking off major risk sentiment today.
With a monster risk-off move pushing EUR/SUD to just above the 1.33 handle, it obviously looks like I won’t be hitting my open orders today. I have decided to close my open orders to short EUR/USD at 1.3570. No Trade.
In retrospect, I really did feel that IMF story would give just enough boost to hit the top of the range, but I guess underestimated how badly traders are ready to dump euros. Like I mentioned in the BabyPips.com monthly newsletter, it looks like the pair is well on its way to hit 1.3000 before the end of the year. The options look limited for a silver bullet to save Europe and now we’re seeing the market catch on as we saw the worst auction for German bunds since the start of the euro.
So, I’m remaining euro bearish for now, but as always, anything can happen. We’ve got a US holiday to get through this week, and only about 3 more full trading weeks until the end of the year. Stay focused and stay flexible. Good luck and good trading!
Trade Idea: 2011-11-22 18:33 ET
Good evening forex friends! It looks like volatility is slowing down a bit as we head into the holiday season, and EUR/USD is shaping up to be the best market to play a range if it is.
Today’s trade idea is pretty simple. On the 15m chart above, we can see a well defined resistance area around 1.3540 – 1.3550. Given that we’re still in negative euro sentiment mode, it makes sense to me to short there especially as we head into the holidays where volatility comes down a bit.
We do have news events later today from Europe in the form of various Manufacturing and Services PMI releases. In the past few releases, this data pushed the pair down more often than now, and with Europe data looking weaker with each passing month, I expect the trend to continue.
We also have the US Durable Goods Orders early in the US session later. The reaction tends to be a crapshoot, so I may close any open positions or orders ahead of time.
For now, I look to short just above that resistance area at Tuesday’s high (1.3570), my stop will be half of the daily ATR, and my target will be the well defined support area as marked on the chart above. Here’s what I am going to do:
Short EUR/USD at 1.3570, stop at 1.3650, pt at 1. 1.3435
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.
This trade setup gives me a potential return-on-risk of about 1.6:1, potentially more if I scale into a winning position.
As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!