Pick of the Day: EUR/USD – Closed Trade

Closed Trade: 2007-06-07 11:40

Our trade was stopped out during the Euro session on an unforeseen event. North Korea launched two shot range missles off its coast today, after which traders flocked to the dollar on as a “flight to safety” response. The dollar rallied and took our trade to the stop out level… doh!! Again, it was an unforeseeable event, and it’s a good thing we had a stop on.

1st trade: -25 pips
2nd trade: -30 pips
Total: -55 pips

Trade Adjustment: 2007-06-06 00:00

The ECB hikes rates up by 25 basis points to 4.00%. We saw an initial spike up before the pair retraced down and hit our tight stop at 1.3495. Trichet’s comments were pretty neutral as he basically stated that the ECB will “do what we judge is appropriate when the time comes.”

Hey, I’m still long bias on this pair so I am re-entering at 1.3500.

Stopped out: -25 pips

Re-enter long at 1.3500, stop at 1.3470, pt at 1.3550

Good luck!

Let it Ride: 2007-06-06 00:00

No new trade orders tonight as my focus is on EUR/USD ahead of the ECB Interest Rate statement and Trichets comments after the decision is made around 07:45 am EDT.

We saw the Dollar rebound today on stronger than expected ISM Services data, but the pair failed to drop past the 1.35 level keeping our trade alive. This shows that trader’s sentiment is still a strong possibility we may see an interest rake hike soon.

No major event risk ahead of the interest rate statement, so we will “Let it Ride” as I expect the EUR/USD to rally a bit further throughout the Asia/Euro trading session. No trade adjustments for now. Stay tuned ahead of the decision for trade adjustments based on price action in the upcoming Euro session. Good luck!

Trade Update: 2007-06-05 09:20

Just a quick update. EUR/USD rallied this morning during a broad based US Dollar selloff. Our long order was triggered at 1.3525 and the market continued to rally before meeting resistance near 1.3550 and retracing back to around 1.3530. We will hold our trade for now with one minor adjustment:

Trail stop by moving from 1.3475 to 1.3495

Good luck!

Trade Idea: 2007-06-04 23:15

Pick of the Day

Welcome! Today we will take a look at EUR/USD. Last week, we saw positive jobs data, but the data that was more interesting to me was the revised lower GDP showing a slowing economy, the negative Personal Income number and weaker than expected Core PCE number.

Okay, here’s what I’m thinking: A decline in the consumer’s income means less spending, but the Personal Spending number was better than expected – what’s up with that? Credit borrowing of course! Well, with institutions tightening up lending policies I see Personal spending decline when you combine the inability to borrow and Personal Income decline. The Greenback will not bode well in the months to come if consumers cut back on spending.

Core PCE (the preferred measure of inflation by the Fed) came in weaker. Weaker inflation data means another drop in the possibility of the Fed holding or raising rates. Again, not good for positive Dollar sentiment.

And what’s going on with the Euro? Well, sentiment is up on the strong possibility of rate hikes in the very near term (possibly this week?), so we should see it rally at least up until the rate decision on Wednesday.

So, by my view it looks like long EUR/USD is the way to go, but we will wait for the pair to break out of its range first. Before we look at our trade idea please be aware of today’s event risks including the 2007 International Monetary Policy Conference (Trichet will be speaking), EUR Retail Sales and Services PMI, and ISM Services data.

Long EUR/USD at 1.3525, stop at 1.3475, pt1 at 1.3575, pt2 at 1.3600

Please remember to never risk more than 1% on any single trade. Adjust position sizes accordingly.

Good luck!

  • trooper

    hi im new to forex sorry for asking a silly questions i understand the pick of the day theme i.e the long euro/usd stop at but whats pt1 and pt2 stand for and why 1 and 2 many thanks trooper

  • trooper

    hi im new to forex sorry for asking a silly questions i understand the pick of the day theme i.e the long euro/usd stop at but whats pt1 and pt2 stand for and why 1 and 2 many thanks trooper

  • Pipcrawler

    Hello trooper,

    pt1 and pt2 means “profit target 1″ and “profit target 2.” The foreign exchange is a very volatile market, and if a trade goes our way I like to lock in profits before the trade can possibly go against me. So, when the market hits the pt1 level I like to close half of my position to lock in profits and adjust the stop on the remaining half of my position (closer to breakeven or beyond to lock in more profits). This reduces my overall risk by creating a risk free trade and now I can sleep better at night :)

  • Dinka

    Why not use a trailing stop?

  • Pipcrawler

    Hello trooper,

    pt1 and pt2 means “profit target 1″ and “profit target 2.” The foreign exchange is a very volatile market, and if a trade goes our way I like to lock in profits before the trade can possibly go against me. So, when the market hits the pt1 level I like to close half of my position to lock in profits and adjust the stop on the remaining half of my position (closer to breakeven or beyond to lock in more profits). This reduces my overall risk by creating a risk free trade and now I can sleep better at night :)

  • Dinka

    Why not use a trailing stop?

  • Pipcrawler

    Hey Dinka,

    Not all brokers offer a trailing stop capability in their platform

  • Pipcrawler

    Hey Dinka,

    Not all brokers offer a trailing stop capability in their platform

  • PaulL

    Hello
    I’m trading from the UK. How does time of day play in your trading decisions?

  • PaulL

    Hello
    I’m trading from the UK. How does time of day play in your trading decisions?

  • Pipcrawler

    Hello Paul,

    I tend to be a longer term trader now a days so time of day really isn’t a big factor. I usually do my analysis during the Asia session because it is quiet and usually no major news out during this period. I try to enter positions during session overlaps like the Asia/Euro overlap or Euro/US overlap. Better liquidity, which means better spreads and execution. I do avoid entering positions during major news events to avoid slippage in the fast markets. I’m not sure if i answered your question, but I hope this helps.

  • Pipcrawler

    Hello Paul,

    I tend to be a longer term trader now a days so time of day really isn’t a big factor. I usually do my analysis during the Asia session because it is quiet and usually no major news out during this period. I try to enter positions during session overlaps like the Asia/Euro overlap or Euro/US overlap. Better liquidity, which means better spreads and execution. I do avoid entering positions during major news events to avoid slippage in the fast markets. I’m not sure if i answered your question, but I hope this helps.