Looking to Jump Back in the EUR/USD Downtrend – Trade Closed

Trade Closed: 2011-10-07 15:00 ET

Good afternoon forex fanatics! My swing setup for the week didn’t pan out as the sentiment shift back to risk tolerance was the real deal.

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


The euro rallied this week as optimism grew with reports that plans were in motion to recapitalize banks. This not only sparked a rally in the euro, but also risk taking in general. The Greenback took losses across the board as traders piled back into riskier assets.

For a while, the previous week low held as a resistance level, but it was the ECB press conference where they announced extending loans to banks is where EUR/USD really took off higher and broke that crucial psychological area. Top off the week with positive jobs data from the US and the bulls never looked back. My trade was triggered and stopped out today at 1.3485.

Total: -85 pips/ -1.0% loss

Looking back, I think the setup and execution was pretty straight forward. No mistakes there. The only frustrating thing was that my trade missed being triggered earlier in the week by 1 pip and a 150 pip dropped followed. This would have been a near 2% gain on my account. Also, I probably could have gone more conservative with my trade entry and gone in at the 61% Fib, but I think I’ll stick to being aggressive on my entries for now because for me, getting in the move outweighs missing the move with a too conservative entry.

Overall, I think it was a good setup that just didn’t work out this time. Can’t win’em all, right?

That’s it for this week. Thanks for checking out my blog and have a great weekend!

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Trade Idea: 2011-10-04 13:45 ET

Good afternoon! The week has already kicked off and it looks like volatility has not yet left the building. The European debt and banking issues continue to drive sentiment, but earlier today, Bernanke’s testimony to Congress may have setup another opportunity to play the overall trend.


As I mentioned up top, the markets priced in news from over the weekend that Greece would not receive its next tranche of loans until November. EUR/USD continued its sell off from Friday, dropping 200 pips from the week’s open. Today, Bernanke testified to Congress’s Joint Economic Committee. His most moving statement was that the Fed “will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability.” Traders took this statement as a sign the Fed may not be done year with quantitative measures, sparking short-term risk taking sentiment.

For me, this is a short-term reaction, especially since nothing was really changed policy wise, nor new actions were announced. I’ll look at this pop higher in EUR/USD as an opportunity to short–at the right price of course.

And what price may that be? Using the one hour chart above, to me it looks like broken support may be an area of interest for sellers to jumb back in. This area also happens to be between the 38% and 50% Fib levels, as well as being just under a psychological handle. Stochastics have not yet indicated overbought conditions, so I think the market may get up to that area.

If the market does reach those levels, I think the possibility of resistance holding in that area is strong in my opinion, so that’s where I look to short. Here’s what I will do:

Short EUR/USD at 1.3400, stop at 1.3485, pt at 1.3150

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

This trade structure puts my stop above that 61% Fib level and gives me a near 3:1 potential return-on-risk.

We do have major events on the Forex calendar this week, most notably the US Non-Farm Payrolls report this Friday, but I think the sentiment will continue to be focused on the European debt/banking issues and a possible fall back into global recession.

As always, I’ll stay flexible and if the market calls for a quick adjustment, be sure to follow me on Twitter and Facebook for updates of what I am doing. Good luck and good trading!

  • Yousf

    i think u missed the hidden bearish divergence on the hourly chart right next to the 1.3300 psycho level. im already short.

    • pipcrawler

      Great job spotting that.  That formed as I was writing it up! Doh!  I think I’ll still wait to see if I can get in at my desired price.  Good luck to ya Yousf!

  • Njanto

    awe!!! I could not agree more.

  • nb

    hmm stabilised for now….some support low 130s

  • Mattspips

    I just shorted this pair, after seeing the 38% fib level hold with bearish divergence on the 14 period RSI seen on the hourly I think we are heading back down to 1.3150 right now – not sure if price will make it up to the 50 or 62% fib levels. 

    • pipcrawler

      yeah, we just got a doji on the one hour and that 1.3350 area is still holding as resistance.  I may adjust by scaling into this one.  Good luck to you Mattspips!

      • Mattspips

         Seems to be forming a rising wedge at the moment too, with bearish divergence on the RSI from the past 3 tops.  Hope this pair makes it back down to the 1.3150 lows again. 

        200 pip move would be saweeeet !

  • Fudoose1

    perfect entry, thanks so much, I got 140 pips when I was out for dinner, you’re a legend!

    • pipcrawler

      A legend??? hahaha I’m far from it sir! Glad to hear you did well… congrats!

  • Yousf

    im long at eur/usd at 1.3360. i think the directional bias has changed.

    • pipcrawler

      You could be right Yousf.  Slowly, EU leaders will come to some hard plan to bail out banks and soverign debt holders.  Each day that this sentiment holds is good for the euro and risk takers…unless it doesn’t come to pass.  Trade safe my friend!