Shorting EURAUD – Trade Closed

Trade Closed: 2010-05-18 00:05

PoD Chart

The trade started out great, but it looks like the Euro found temporary relief from panic selling at the start of this week. 1.3950 held as the bottom for EURAUD and it’s been all upside from there. Doh!

The chart above says it all as the pair maxed out around 1.4190, just 10 pips above my stop at 1.4180 where my trade was closed and my hopes and dreams for a trade of the year has fizzled away.

Total: -150 pips/ -1.0% loss

The question to figure out now is whether or not this is a correction or if this is a change in sentiment. Has the Eurozone corrected its debt issues? Will they fail as a union? Will the euro still be around a year or two from now?

I think these questions will take time for a clear answer to come to light. For me, the big question that will answer it all is whether or not the good citizens of the European Union can make the change in their mindsets and lifestyles to adjust to the cuts needed to bring debt levels back down from the stratosphere. Of course, this isn’t the only factor in a very complex matter, but I think it’s one of the biggest.

Again, it will a while before we see any results of the actions taken by the EU and IMF, and until then I’ll keep an eye out for opportunities to play the volatility that should accompany this uncertainty in the near term. Stay tuned!

b>Trade Idea: 2010-05-13 23:44 EST

PoD Chart

Good evening Forex Fanatics! I’ve finally recovered from the devastation of my last missed trade and now ready to jump back on the wagon to do some trading. Fundies and technicals are lining up nicely together on EURAUD, is it going to be my new “Trade of the Year?”

On the one hour chart, it’s pretty clear the pair is trending lower but currently retracing. I’ve decided to use my usual setup of Fibonacci as I can see potential resistance areas between the 38% to 61% Fibonacci retracement area and stochastics indication overbought conditions. Time to short?

Fundamentally, everyone knows about the issues in the Eurozone with the debt issues with the “PIIGS” (Portugal, Italy, Ireland, Greece, Spain), and even with almost $1,000,000,000,000 ready to go as aid for these countries from the rest of the EU and IMF, there is little doubt the fiscal issues of each country will get fixed on their own. And why would they if free money is gonna be thrown at them during a crisis? I expect the Euro to weaken even further if this sentiment does not change.

On the other side of the ocean, we have recent positive jobs data from the “land down under” and potential interest rate hikes maybe as early as September from the RBA. The economy is growing, people are getting jobs, and interest rates may continue to rise in Australia… hmmm…everything is looking rosy for the Aussie, right?

I think so which is why I look to short EURAUD as the pair is in a strong downtrend and the fundamentals continue to favor the Australian Dollar over the Euro.

I will short just below the 38% Fibonacci level, and my stop will be the daily average true range of 155 pips. I’m leaving my profit target open as I think this is a strong trend that will continue, strongly supported by the fundamental weakness of the Eurozone. Here’s what I am going to do:

Short EURAUD at 1.4030, stop at 1.4180, my profit target is “0” or whenever the trend changes… haha

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

So, a nice simple trade, and if I do get triggered and the trade does go my way, then I will add to my position along the way every 150 pips.

This may turn out to be a longer term trade, but we’ll just have to wait and see. Thanks for checking out my blog and good luck!

  • Goblin

    ehm maybe if you find time you could make an update and an suggestion if it will be better to lift the stop loss or let it run into :)…
    very thanks – doesn’t look THAT good atm

  • Goblin

    ehm maybe if you find time you could make an update and an suggestion if it will be better to lift the stop loss or let it run into :)…
    very thanks – doesn’t look THAT good atm

  • mvaya1

    I believe your play is about to pay off. I set my stop loss a little higher then yours and opened another 1% position when the 4hr chart showed reverse. Starting to pay up I will ride it down now. Thanks. Markets are very volatile but the fundamentals are still short the EUR and long AUS.

  • mvaya1

    I believe your play is about to pay off. I set my stop loss a little higher then yours and opened another 1% position when the 4hr chart showed reverse. Starting to pay up I will ride it down now. Thanks. Markets are very volatile but the fundamentals are still short the EUR and long AUS.