Playing Recent EUR/USD Weakness – Trade Closed

Trade Closed: 2013-07-09 16:42 ET

Good afternoon forex friends! I decided that closing out the position at these levels and getting back on the side lines would be the best idea ahead of some top tier events and as the market currently tests major support.

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

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Since my last update, EUR/USD found support at the beginning of this week, probably thanks to the news that Greece received more aid from European governments on Monday. This was short-lived as euro bears took that as an opportunity to play the downtrend around the 1.2900 handle. After a break of 1.2800 during this morning’s US session, I decided to add back a half position at 1.2788 to maximize profit in case we see momentum take the pair lower.

It’s now the end of the US session, and we’ve got the FOMC meeting minutes and Bernanke giving a speech tomorrow at the National Bureau of Economic Research Conference. And while I don’t expect them to be a huge catalyst, I don’t want to take a chance of a negative USD suprise. Besides that, I’m more concerned that we’ll finally see a reversal higher in EUR/USD after the pair has dropped over the past 3 weeks from 1.3400 to its current levels at just under 1.2800. It might be time for traders to take profits, and what would be a better place than the major support area between 1.2750 – 1.2800, the March 2013 lows. So I closed my remaining open position at 1.2788.

1st half: +130 pips
2nd half: +225 pips
3rd half: +0 pips
Total: +177.5 avg. pips/ +1.18% gain

In hindsight, there were probably two things I could have done differently. First, was to keep my full position on into the US NFP report. There was a lot of evidence from ISM services and ADP that this would be a positive number; it was positive surprise and very bullish for the Greenback. Second, I could have added back another half position as the pair was testing 1.2900, or just under it. I had already commented in social media that this would be an attractive area for sellers to jump back in; I should have listened to my hunch and taken advantage of the pull back.

Overall, it was a good trade, but I could have definitely done better. Trade management and timing is the hardest part of the this business for me, so I’ll definitely continue to focus on making better decisions in that regard.

I’m still bearish on EUR/USD, but I think we’ll see a pull back that will allow me to jump in this pair short at a good price. If the pair breaks lower past the March lows, the next area of support seems to be the 1.2650 – 1.2700 range, so that event may be good for a short-term trade. In either case, I’ll stay on my toes to act when the opportunity is right. Until then, thanks for checking out my blog and stay tuned by following me on Twitter and Facebook!

Trade Update: 2013-07-05 15:55 ET

Good afternoon traders! Big moves thanks to both the ECB meeting and US NFP events over the last two sessions. Here’s a quick update on the adjustments made to reduce risk into the weekend.

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To be honest, I didn’t think anything new would come from the ECB meeting, but lo and behold, Draghi surprises the markets by actually giving forward guidance….what?! Analysts already suspect that low interest rates would most likely be here to stay for the eurozone, but to actually have Draghi say it was a shocker. EUR/USD dropped on the event, and I decided to create a risk free trade by basically taking my stop to breakeven.

US employment data came out today. To avoid the possibility of a disappointment, I closed out half of my position (1.2883) to lock in gains. Fortunately for USD bulls, it was a better-than-expected number (+195K vs. +165K forecast) and we saw another spike lower in EUR/USD to 1.2800. After the market settle just above 1.2800, I decided to move the stop on my remaining position to 1.2910 to lock in profits ahead of the weekend.

Overall, I think these events may support a further downtrend in EUR/USD for the time being, and since Asia has yet to price in the US jobs data I decided to keep my position open over the weekend to catch a possible sell off at the open of trade on Monday. We’ll see what happens.

But until then, it’s time to review the week in trading and enjoy the weekend! Thanks for checking out my blog and have a great weekend!

Trade Idea: 2013-07-03 12:11 ET

Good morning! Today, I decided to jump in on the fresh EUR/USD downtrend as the Greenback finds support and the euro falls on fresh Portugal news.

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We saw broad weakness today in the euro thanks to news that two ministers resigned from the government, sparking speculation and a possible return of focus to the European debt situation. At the very least, political instability (not only in Europe but also what we’re seeing in Egypt) should be a short-term catalyst for risk aversion, which is usually US Dollar bullish. Additionally, to make an argument for a bearish case, June euro zone PMI’s continue to show mostly contraction in the area’s manufacturing sector.

On the other side of the pond, we saw mixed data from the US, but mostly good as ADP Non-Farm Employment data came in better-than-expected (188K vs. 161K), which could setup a positive government number on Friday. If so, it supports the argument for a Fed Taper sooner rather than later, which can be Dollar bullish.

So, I’m short-term bearish on the pair for now, and with the spike higher thanks to a weak ISM Services PMI number just a couple of hours ago, I can get in short at a good price.

Technically, the pair was in consolidation mode last week, so this break below 1.3000 on geopolitical uncertainty and US economic strength might be the real deal. I waited for a retest of the break, and with market back in the consolidation zone, I decided to short a full position. My stop is wide because of this Friday’s NFP report, but I also have large targets as I ultimately target March lows. Here’s what I am doing:

Short EUR/USD at market (1.3013), stop at 1.3163, max profit target at 1.2750

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

I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.75:1. Depending on the driving themes at the time, if the market hits the May lows I may scale in or out half a position and trail my stop. Of course, anything can happen in the forex markets, so if the story drastically changes, I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

Thanks for checking out my blog…good luck and good trading!

  • liliku

    How happy I am for not being late to see your new post. i am agree with portugal factor to lowered eur.let’s ride ride the profit!

  • darthfrancis

    hmm great analysis but may go up before it goes down as in daily chart it is in a upward channel. just my 2 pips.

  • PipMeHappy

    Good morning, PipCrawler! There is a lot of support for market-wide Euro-shorting today, although the congestion around 1.3000 may not be resolved until after 12.45GMT as many investors hold back until Draghi’s speech… Nothing has moved the Euro down much since the Cypriot crisis, so even the Portuguese and Italian political instability are being overlooked until the ECB rate cut fears are either confirmed or dissipated. With more calls for US-style QE being implemented in Europe, the ECB benchmark interest rate is less of a focus: investors will be scouring Draghi’s speech for clues about other measures being introduced to stem the collapse of the Union… Even if a rate cut did occur, it may have already been priced in, although clearly the bearish scenario should remain unchallenged… With the US markets out of play today, there may be thinner liquidity and more volatile market conditions, so it is advised by many that stops should be widened accordingly to prevent sudden spikes triggering entries at the wrong time or stopping trades out even when our bias is right.
    Good luck catching those pips!!

  • TruthTrader

    really good call, could not benefit unfortunately, but a good one indeed.

  • liliku

    Let have big party and have nice weekend. Once again ,let’s ride the pip to the 1.2555. Come on , give me your wide smile!.Oke let trailling stop and vps take the rest of this happy trading. Let ‘s turn off our computer now and finding new set up on monday. Thank sooooooooooooooooooooooooooooooooooooooooooo much.

  • Quigua

    Just perfect. I read your post yesterday and place two orders following your advice. What a great day!

  • pipcrawler

    Thanks for the comments guys. I gotta say, I got pretty lucky on this one as I didn’t think there was really anything new said by Draghi that everyone hasn’t already been saying about the ECB and Europe. I guess having the ECB actually giving guidance is a huge step, but something I didn’t expect. We still got US NFP tomorrow, so we’ll have to wait and see where that takes EUR/USD next. Have a great day everyone!

    • PipMeHappy

      Good morning, PipCrawler! How did you get on? Did you close your trade or are you still hoping for 1.2750? Lots of EUR/USD event risk this week, esp. today (decision on Greece’s next aid tranche)…
      I closed my 23/5 EUR/USD short as it hit my target twelve days ahead of projected due date. Sitting tight now for either a bounce or a confirmation of fresh lows before trading this pair again.
      Happy trading!

      • pipcrawler

        Hey PipMeHappy, I’m still in half a position with my stop now at 1.2910. I’ve explained my latest adjustments in my blog update above, but overall there’s a strong fundamental argument for the pair to keep attracting sellers for now. We may see 1.2900 before the week is up, but I think that’s gonna be a target for sell orders. We’ll see!

  • pipcrawler

    1.2800 just broke! Added half a position and adjusted my stop to 1.2865.

  • liliku

    waiting for your new trade idea.

  • kenny

    You are so bloody lucky!!!!!! What it takes you 4-5 days to earn totally erased with just one FOMC minutes release!!! Makes one wonder what is the use of all those analysis on technical and fundamental are good for??? Trading on news make more sense!!!