Pick of the Day: EUR/USD – Trade Closed

Trade: 2008-12-11 07:32

It looks like 1.3000 was unable to hold the Euro bulls down as the pair broke past and hit my stop loss level.

Total: -200 pips/ -1.00% loss

So, I took a small hit this time and the question now is, “are we now witnessing a change in sentiment?” Ridiculous amounts of money have been thrown at the credit crisis, interest rates are dropping across the globe, and the majority of de-leveraging may have run its course – is it time for risk taking behavior to come back? I don’t know, but if it is, we probably won’t see the same type of volatility we’ve seen over the past few years as we are now in an environment where institutions can’t get access to cheap and easy money, and don’t trade on such high leverage.

We are in a new age and it’s time to make some adjustments. As for the EUR/USD, this may be a breakout of the range and a new trend higher forming. I will continue to watch and plan for the possible move higher. Stay tuned!

Trade Idea: 2008-12-09 23:39

PoD Chart

What’s up! It looks like markets are calming down for the holidays and traders are staying away from taking bets as we approach the end of the year. EUR/USD has been rangebound for the past month or so, and that’s how I will play it out as the pair approaches the top of the range.

I have the 4 hour chart up and we can see the pair recently found resistance at 1.30. With stochastics in overbought territory, 1.3000 may continued to be watched and played as a resistance level by those still left in the market.

We don’t have any major news in the calendar for the upcoming trading sessions, so I suspect technicals will play out for now and that rangebound behavior may still dominate. I am also still risk aversion bias on current economic weakness across the globe, so a EUR/USD is appropriate here. Here’s what I’d like to do:

Short EUR/USD at 1.3000, stop at 1.3200, pt1 at 1.2800, pt2 at 1.2600

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

Stay tuned!

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  • padlmi

    You’ve been on quite a roll with your last few picks and given the current climate I think this will be a winner as well. On your entry points, do you set up a market order and wait for it to hit or do you look for a good entry point via a shorter term chart?

  • Ray_1

    Hi pipcrawler, will you consider 1.2900 as a possible TP point too? I got in the same trade as you too. But i am aiming for 1.2900 instead of 1.2800.

  • hany_egypt

    Hello pipcrawler, could you please clarify the meaning of “risk aversion” ?

  • padlmi

    You’ve been on quite a roll with your last few picks and given the current climate I think this will be a winner as well. On your entry points, do you set up a market order and wait for it to hit or do you look for a good entry point via a shorter term chart?

  • Ray_1

    Hi pipcrawler, will you consider 1.2900 as a possible TP point too? I got in the same trade as you too. But i am aiming for 1.2900 instead of 1.2800.

  • MonsterTrader

    need a strong stomach…

  • sukiyaki

    Hany Egypt,

    Risk aversion = avoiding risk

    The Euro dollar is considered a higher yielding currency compared to the USD.

    So when the market is in risk aversion bias, it means traders/investors try to avoid risk by selling higher yielding currency (EUR $ in this case) and buying in less risky, lower yield currency (USD in this case).

    I hope I helped abit. Anybody out there who knows better, please feel free to correct me.

    Cheers!
    Suki

  • hany_egypt

    Hello pipcrawler, could you please clarify the meaning of “risk aversion” ?

  • MonsterTrader

    need a strong stomach…

  • sukiyaki

    Hany Egypt,

    Risk aversion = avoiding risk

    The Euro dollar is considered a higher yielding currency compared to the USD.

    So when the market is in risk aversion bias, it means traders/investors try to avoid risk by selling higher yielding currency (EUR $ in this case) and buying in less risky, lower yield currency (USD in this case).

    I hope I helped abit. Anybody out there who knows better, please feel free to correct me.

    Cheers!
    Suki

  • Babysteps

    Hi pip
    Strange day nothing for sure my eyes got red.
    Hit 1.30 4time and 1.3070 and still hanging refuse to drop, closed my position and now watching….
    where it’s going grrrrr

  • Helltopia

    Well… it should have run out of beer.. erm.. steam now, since hitting resistance at 1,3070ish. If techies are dominant now it should head for the ground again…
    Lets wait and see, maybe we are in luck :)

  • moneeeb

    zzzzZZZZZzzzz, I guess that goes to most the pairs,However, the NZD/USD was interesting.

  • Babysteps

    Hi pip
    Strange day nothing for sure my eyes got red.
    Hit 1.30 4time and 1.3070 and still hanging refuse to drop, closed my position and now watching….
    where it’s going grrrrr

  • Helltopia

    Well… it should have run out of beer.. erm.. steam now, since hitting resistance at 1,3070ish. If techies are dominant now it should head for the ground again…
    Lets wait and see, maybe we are in luck :)

  • Babysteps

    Ok let’s see short@1.3055 SL 1.3125 Above R1
    Hope it works
    By the way if we draw FIB since eur/usd start take top and low we will find we r now at 38.20 fib.

  • moneeeb

    zzzzZZZZZzzzz, I guess that goes to most the pairs,However, the NZD/USD was interesting.

  • GreedyPiper

    I think it’s no more range bound now, passed 1.3150. May be it’s time take a look at the 3 months graph :)

  • Babysteps

    Ok let’s see short@1.3055 SL 1.3125 Above R1
    Hope it works
    By the way if we draw FIB since eur/usd start take top and low we will find we r now at 38.20 fib.

  • pakiestra

    I agree with GreedyPiper, 1.3300 looks like a next target. In the view of the low volume, dollar being bitten hard with a stick I think 1.3300 to 1.3500 is possible, before everybody realise that European economy is tanking more that thought. All indices came yesterday and were ignored as the capital is thin, positions are closed before year end so the movements are range bound and chaotic. I think the S/L 1.3200 will be hit easily today/Friday.

  • pakiestra

    Upps sorry I didn’t support the previous post with data so looks I may talk baloney. Previous range high (it’s still the range although Euro is ranging for more than a month) is 1.3296 at 26th October-that should be tested pretty soon. There is trendline resistance at 1.3475 (downtrend, line from July highs) which could be tested, price action is now above 50 EMA so there is some upward momentum in the pair. My longs are already bringing first pips. :-)

  • Babysteps

    OK HIT R1 AND NOW R21.3165 AND R3 1.3259

  • sebastianmacias

    Do you guys think It would be worth moving the s/l a little so we don’t lose the trade? are there any chances for it to still hit the profit target?

  • GreedyPiper

    sebastianmacias, I don’t thik it’s a good idea. I closed my trade last night when it came back to 1.3 with +10 pips because going against this sort of trend is suicide.

  • Babysteps

    Well,There is always another chance.

    Pip can you please check my post at 22-November,I really looking forward to your reply.
    link to forums.babypips.com

  • GreedyPiper

    I think it’s no more range bound now, passed 1.3150. May be it’s time take a look at the 3 months graph :)

  • pakiestra

    I agree with GreedyPiper, 1.3300 looks like a next target. In the view of the low volume, dollar being bitten hard with a stick I think 1.3300 to 1.3500 is possible, before everybody realise that European economy is tanking more that thought. All indices came yesterday and were ignored as the capital is thin, positions are closed before year end so the movements are range bound and chaotic. I think the S/L 1.3200 will be hit easily today/Friday.

  • pakiestra

    Upps sorry I didn’t support the previous post with data so looks I may talk baloney. Previous range high (it’s still the range although Euro is ranging for more than a month) is 1.3296 at 26th October-that should be tested pretty soon. There is trendline resistance at 1.3475 (downtrend, line from July highs) which could be tested, price action is now above 50 EMA so there is some upward momentum in the pair. My longs are already bringing first pips. :-)

  • Babysteps

    OK HIT R1 AND NOW R21.3165 AND R3 1.3259

  • sebastianmacias

    Do you guys think It would be worth moving the s/l a little so we don’t lose the trade? are there any chances for it to still hit the profit target?

  • GreedyPiper

    sebastianmacias, I don’t thik it’s a good idea. I closed my trade last night when it came back to 1.3 with +10 pips because going against this sort of trend is suicide.

  • Babysteps

    Well,There is always another chance.

    Pip can you please check my post at 22-November,I really looking forward to your reply.
    link to forums.babypips.com

  • Pipcrawler

    Thanks for the comments and posting your own views everyone! I took a hit today, but it’s all good thanks to money management! This maybe the breakout the pair needs to start moving again…we’ll see!

  • MonsterTrader

    Pipcrawler its all good brother!

    This pair has been totally crazy lately and I think that rally really surprised a bunch of ppl. Myself included, I took a nice hit, though I was less conservative in my money mgmt.

    Neways stochs are still higly overbought, so maybe there will be an opportunity to short soon…either way I’ll be on stand-by watching for your next move!

  • Pipcrawler

    Thanks for the comments and posting your own views everyone! I took a hit today, but it’s all good thanks to money management! This maybe the breakout the pair needs to start moving again…we’ll see!

  • MonsterTrader

    Pipcrawler its all good brother!

    This pair has been totally crazy lately and I think that rally really surprised a bunch of ppl. Myself included, I took a nice hit, though I was less conservative in my money mgmt.

    Neways stochs are still higly overbought, so maybe there will be an opportunity to short soon…either way I’ll be on stand-by watching for your next move!

  • fx-liono

    Pipcrawler any ideas as to what next week will bring us, are we looking at big jump up in eur/usd or side ways as its been between 1.33 and 1.34 for friday or will it be moving lower to the 1.31.
    How will key events such as possible opec cuts, fed cuts and some sort of auto bailout effect things?

  • fx-liono

    Pipcrawler any ideas as to what next week will bring us, are we looking at big jump up in eur/usd or side ways as its been between 1.33 and 1.34 for friday or will it be moving lower to the 1.31.
    How will key events such as possible opec cuts, fed cuts and some sort of auto bailout effect things?