Looking to Jump in Short EUR/USD – Trade Closed

Trade Closed: 2010-10-20 5:20 pm ET

PoD Chart

Wow! What a difference 24 hours can make on currencies as the China interest rate raises didn’t have much of a lasting effect on the markets. Traders returned to further Fed QE2 sentiment, and with the help of positive corporate earnings, risk tolerance plays were quickly picked back up.

So, it looks like Asia and European traders took the panic sell off of risk as another opportunity to dump Greenbacks and buy high-yielders, equities, and commodities.

EUR/USD rallied and triggered my short order at 1.3825 and found temporary minor resistance at the Fibonacci levels. Positive earnings in the US sparked the strong rally in risk and Dollar sell off, and took me out of my trade a few hours later at 1.3935. Doh!

Total: -110 pips/ -1.0%

I don’t really feel too bad about this trade other than I couldn’t put together 3 winners in a row. The idea was solid, as I thought the China news was a short-term game changer on sentiment. With an empty calender today, it seems that sentiment just flip flopped on me. No way to control that.

Price action seems pretty volatile this week, so I may get a chance to take another opportunity and head into the weekend positive. Stay tuned and thanks for checking out my blog!

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Trade Idea: 2010-10-19 7:46 pm ET

PoD Chart

Good evening! Big news in the markets today as China raises overnight deposit and lending rates. This was very Dollar bullish in today’s session, but will it continue?

Fundamentally, this news could have been a game changer for short-term sentiment on the Greenback and could help continue its bounce higher after hitting a major psychological area around 1.4000 against the Euro. For the rest of the week on the Forex calendar, we could see help from Eurozone PMI data as it is expected to come out weaker than the previous readings, and if US initial claims and the Philly Fed survey comes in weaker than expected, risk aversion could bring in more USD buyers.

On the chart, we can see that the pair’s fall after China’s decision on interest rates has stalled and could retrace. If it does, it could find resistance at broken support/Fibonacci retracement levels as Asia session traders get the chance to jump in the trend lower. Here’s what I am going to do:

Short EUR/USD at 1.3825, stop at 1.3935, pt1 at 1.3725, pt2 at 1.3535

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

As always, stay tuned for updates and adjustments. Thanks for checking out my blog!

  • njanto

    Last night I looked at my acount and I was 170 pips in the black. I wake up and in the morning and now I only have 40. my trading system. still says eur/usd can still go lower. but after lossing 130pips of my profit, I take what I have got and run! Now that I have read your post I have desided to stay in the trade. aware almost the same as yours so… I guess what I am saying is thanks I developed a system and today you helped me stick to it. even if it does not go my way will be happy I stuck to system. Now lets whats what under the hut.

  • Pipcrawler

    Hey, njanto! Our systems and risk is all we can control…the market will always do its own thing. So, let’s keep playing what our systems say and hopefully we’ll both get winners. Good luck!

  • njanto

    Last night I looked at my acount and I was 170 pips in the black. I wake up and in the morning and now I only have 40. my trading system. still says eur/usd can still go lower. but after lossing 130pips of my profit, I take what I have got and run! Now that I have read your post I have desided to stay in the trade. aware almost the same as yours so… I guess what I am saying is thanks I developed a system and today you helped me stick to it. even if it does not go my way will be happy I stuck to system. Now lets whats what under the hut.

  • njanto

    I should read my posts before I send them!

  • Pipcrawler

    Hey, njanto! Our systems and risk is all we can control…the market will always do its own thing. So, let’s keep playing what our systems say and hopefully we’ll both get winners. Good luck!

  • njanto

    I should read my posts before I send them!

  • tonton

    This was a losing game in the end, but I would like to learn this kind of setup with a proper stop and money management. Anyway, Euro movement is so so wild now mmm now.

  • tonton

    This was a losing game in the end, but I would like to learn this kind of setup with a proper stop and money management. Anyway, Euro movement is so so wild now mmm now.