Portugal Downgrade to Spark a Down Day for EUR/USD? – Trade Closed

Trade Closed: 2011-03-16 22:50 ET

Risk aversion continues to be the name of the game and it looks like the Greenback continues to benefit from it. My short EUR/USD trade was triggered for a few nice pips on the day. Check it!

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

PCDPOD20110317.png

It looks like the potential support-turned-resistance area was the jump off point for Euro bears to pounce on the pair. My short order was triggered at 1.3965 and I got the downward move I was looking for. The pair even broke below 1.3900 and came within 6 pips of hitting my profit target at 1.3860.

After the end of the US session, I decided to close my day trade out at 1.3911 for a respectable 54 pips.

Total: +0.41% gain

The real market mover is the Japanese Yen on the continuing crisis in Japan. My heart goes to those affected by natural and nuclear disasters and if you wish to help, please check out some of the following organizations to donate if you can give:

Oxfam: Japan emergency response
American Red Cross

Thanks!

Trade Idea: 2011-03-16 8:25 ET

Good morning Forex fanatics! Going through the Euro section of FreshPips.com, I saw that Moody’s just cut Portugal’s credit rating down two steps. Time for an intraday short play on EUR/USD?

PCDPOD20110316.png

First it was Spain and now it’s Portugal getting cut by Moody’s to A3–only four steps from junk status! The ratings agency’s outlook remains negative due to “subdued growth prospects” and that the government’s plan to reduce deficits won’t be implemented. Statements like these tend to have a negative affect on currencies, so I looked to EUR/USD for a potential intraday short play.

Zooming into the 15m chart above, we can see that the week open (WO) drew plenty of orders during the Asia session, holding up the pair until the European trading session opened up. With so much interest, that level could draw in more orders during the US session and turn that broken support into resistance for the day.

Besides the fresh news on Portugal, we just got weaker-than-expected housing data from the US (Building Permits 520k vs. 570k and Housing starts 480k vs. 570k), and stronger than expected PPI data (1.6% vs 0.6%). This could be short term Dollar positive, or at least bring in extra volatility to the Euro/US overlap.

So, I have decided to short at the WO, with a stop above the major 1.40 level that has held strongly this week. My target is the PDL (1.3856). This gives me around a 2:1 potential R:R on this trade. Here’s what I am going to do:

Short EUR/USD at 1.3965, stop at 1.4025, pt at 1.3860

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

Actually, because this is a day trade, I am only risking 0.50% on this trade. Stay tuned for updates and adjustments!

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  • gyos23

    “Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.Actually, because this is a day trade, I am only risking 0.50% on this trade.”This is excellent advice! I’m going to put this into practice from here on out. 

    • Jdubb999

       I disagree. If you already have a large account, this IS a good strategy. However, if your account is on the slim side (like almost all the new traders out there), only risking 1% on each trade ISN’T going to get you anywhere anytime soon. My advice is to risk a larger percent depending on your confidence until your account grows to an acceptable amount. This isn’t a safe strategy, it is a strategy to make money at a decent rate until you have a large enough account to start trading like the fat cats.

  • fong

    You are lucky to have close your trade early. The market generally have been bearish on the dollar for past few months. I think you may make more pips buying during dip instead of shorting during retracement for EUR/US pair.

  • fong

    You are lucky to have close your trade early. The market generally have been bearish on the dollar for past few months. I think you may make more pips buying during dip instead of shorting during retracement for EUR/US pair.

  • Pipcrawler

    @fong Yeah, looks like I lucked by taking profits. Thank for the advice as I’ll be looking for was to get in that nice trend. Good luck to ya!

  • Pipcrawler

    @fong Yeah, looks like I lucked by taking profits. Thank for the advice as I’ll be looking for was to get in that nice trend. Good luck to ya!

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