Pick of the Day: EUR/USD – Stopped Out

Stopped Out: 2007-06-28 21:30

Our trade stopped out ahead of the FOMC statement as market players bought USD and sold Euros. USD buying continued as the Fed held rates at 5.25% and as their statement indicates they will continue to monitor future data. So, we were stopped out, but luckily we recognized the data and adjusted our stop to reduce our risk to lose only 25 pips.

Close Trade: 2007-06-28 11:25

Our trade was triggered long during the morning Euro trading session on a whipsaw move before returning back to range trading around its current level of 1.3465. US GDP data came out with the annualized read at 0.7% and the deflator number higher than expected at 4.2%.

With the GDP deflator number higher than expected, I have decided to tighten up our stop as I believe the Fed will have to continue to be focused more on inflation than housing troubles.This last bit of information may lead to a hawkish statement from the Fed, which may push the pair against our position, so we will cut our risk down ahead of the FOMC statement.

Adjust stop from 1.3440 to 1.3455

Trade Idea: 2007-06-27 23:55

PoD Chart

We saw a continuation of range trading yesterday as we approach the FOMC interest rate decision later today at 2:15 pm EDT. Economists are expecting no change in the decision, so the key factor to watch will be the statement afterwards.

The Fed’s focus has been inflation, so any change in stance on inflation will definitely be a market mover. We may also hear comments on housing troubles in the US, but in my opinion we shouldn’t see any new surprises in both matters according to recent data.

On the chart, we see that EUR/USD is in a short term uptrend and unable to break resistance around 1.3470. I think trader sentiment is a weaker dollar, as well as the potential for more hikes in the Eurozone. We could see EUR/USD rally higher and maybe even break to the upside as early as the upcoming Euro trading session, especially if traders price in no change or dovish commentary from the FOMC.

We do have significant event risk before the interest rate statement with GDP data at 8:30 am EDT. This will probably cause some whipsaw action if there is a surprise, but expect the markets to go back into range mode shortly after. Stay tuned for adjustments around that time period. Here’s our trade idea:

Long EUR/USD at 1.3480, stop at 1.3440, pt1 at 1.3500, pt2 at 1.3535

Never risk more than 1% of your account on any single trade. Adjust position sizes accordingly.

Good luck and good trading!

2 comments

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>