Short EUR/USD on Psychological Level Break? – Trade Closed

Trade Closed: 2013-04-25 7:15 ET

No matter how much weak euro zone data was thrown at it, euro bulls held strong and 1.3000 never really broke! Given the odd strength of the euro, I decided to reduce my risk and close it all down.

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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After entering a small short position in EUR/USD on a break-and-retest of 1.3000, the pair couldn’t attract enough sell orders to push it down for good, even with weak euro zone data through out the week.

First, it was the weak euro zone PMI data that helped spark the initial break, and then as expected, German Ifo Business Climate data came in weaker-than-expected (104.4 vs. 106.4 expectations). This lead to a very brief spike lower, as low as 1.2955, but it seems like there were more euro bulls than bears hitting the trade buttons. Finally, we got terrible Spanish unemployment data today (27.2% vs. 26.5% expectation), but that was no help either. For me, if the market gets this kinda data and it’s still strong, that means nothing is gonna bring it down this week. I decided to just close out the trade at market (1.3065) to limit my max risk.

Total: -65 pips/ -0.29% loss

Besides a weak US durable goods data (-5.7% vs. -2.9%) I can’t find a reason as to why EUR/USD rallied (the weak US durable goods data was actually bearish for the pair). But maybe that was enough? Maybe it’s a bout of general risk-on sentiment? Or maybe it’s speculation that the Fed may have to stop the talk of pulling quantitative easing as US jobs still looks weak and inflation cools.

Whatever the case may be, I think it was the right decision to pull out of the trade with the market behaving this way. Probably the only thing I should have done differently was to pull out of the trade as soon as I got the weak German data that I was looking for. With all the major risk events of the first quarter out of the way (and as we head into the summer season), it’s probably best to go for short-term exits rather than longer swing moves.

Overall, I thought it was a good trade, but the market just didn’t behave as I expected, even with the data coming out as expected. I still kept the loss small, and I can live to trade another day….that’s all I can ask for on this one.

That’s it for me this week. Thanks for checking out my forex trading blog…have a great weekend and be sure to swing by next week!

Trade Idea: 2013-04-23 09:30 ET

Good morning forex friends! For this week, I’m going with a simple psychological break on EUR/USD as weak eurozone data sparks euro bearishness. Will traders jump in on the break?

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Earlier in today’s session, we got more dreary manufacturing and service industry data in the form of euro zone Flash Manufacturing and Services PMI. All readings signaled continued contraction, most notably the German data (Manufacturing PMI at 47.9 and Services PMI at 49.2). As expected, this turned traders bearish on the euro, probably for the next couple of sessions.

So, my trade idea for this week is a simple break and retest play at the major psychological level of 1.3000. It easy broke after the PMI data this morning, and it looks like it will retest as I write in the morning US session. I’ll look to short here. My stop is a healthy 110 pips, about half of its weekly average true range, and my target will be the strong support last tested at the beginning of April. Here’s what I am going to do:

Short half position EUR/USD at market (1.3000), stop at 1.3110, max profit target at 1.2790

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

My risk is 0.50% of my account, and with this trade structure, I have a potential reward-to-risk ration of 1.90:1. I think there is a good probability of this working out well as risk sentiment begins to turn negative with the recent global data coming in weaker-than-expected (Chinese GDP, global jobs numbers & manufacturing data, etc.). Tomorrow’s German Ifo Business Climate data may follow that trend and help euro bears in the process. And only look to hold this until Friday, when we’ll get the quarterly US Advanced GDP numbers; this could be potentially bearish for USD if the reading comes in weaker-than-expected.

Of course, if the story changes and changes market behavior, I’ll look to adjust my position as well. Stay tuned for my market observations and thoughts by following me on Twitter and Facebook.

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

  • liliku

    hopefully your best short again. is It now reversal or just bullish trader try to fight back. I am now -22 pip.It is to small to make me nervous comparing with Gbp / Jpy.

    • pipcrawler

      I never know what’s going to happen; I just try to make the best decisions I can with every trade. If any trade makes you nervous–whether the stop is 5 pips or 1000 pips–it means that your position size may be too big and that you’re risking more of your account than you are comfortable with.

  • Bijoymj

    Well done Pipcrawler. I am already in the same trade by shorting @ 1.3009. TP & SL differs slightly from your figures. Hopping best. Let the pips be with us.

    • pipcrawler

      1.2850 is an area I’m watching as well, but I like to have bigger profit targets in case the story changes in favor of big momentum and my directional bias. Nice chart and good luck on your trade!

      • Bijoymj

        Today’s German Data also came out negatively. Hopes, now the price may fall in the trade direction

        • akshay bhujbal

          can you please explain why did market went up even after the German ifo numbers came negative?

          • pipcrawler

            The market did spike lower after the weak German Ifo, but it was short lived. I gave some possible reasons in my review above, but to be honest, there isn’t a clear reason. Sometimes, the market doesn’t have a logical reason for the moves it makes.

    • Bijoymj

      I am Keeping my trade open. I don’t know what is going to happen. But let the trade be live as per trading plan. Risk is 0.50% Hoping best always.

  • akshay bhujbal

    hi, great trade.

    can you please explain why did market went up even after the German ifo numbers came negative?

  • Noel

    im buying 🙁

    • pipcrawler

      Pretty chart… where’s your entry and exit points? I hope you did well!

      • Noel

        i just entry at h4 support and take last resistance 1.31815, i set bollinger band period to 240 to see trend breakout. blue and red candle is gann candle also 240 period.. this is my swing set up.

  • isejimas

    Yesterday I’ve placed buy stop order on 1.3025.
    SL: 1.2993
    TP: 1.3134

    • isejimas

      SL hit cause of lower US unemployment. Plus higher Spain unemployment

  • liliku

    sorry to hear that sir,why do you closed too early? usually you set exit sl more than 100 pips. It is hard for me to say that my copy trade give me profit and still dive. thank you and sorry sa well.May lot of pips be with you on the next trade. hope your best again.

  • Bijoymj

    I am Keeping my trade open. I don’t know what is going to happen. But let the trade be live as per trading plan. Risk is 0.50% Hoping best always.

  • liliku

    come on coach ! let get the best on monday

  • liliku

    where are you ?

    • pipcrawler

      I’m around liliku… I just don’t see a clear enough setup for my tastes with the ECB rate decision and US jobs data coming up this week. I’m sticking to day trades for now, but those are harder to post since it take a while to put a post together. Stay tuned–I’m still looking hard for a good setup 🙂