Support Break on EUR/USD? – Trade Closed

Trade Closed: 2013-09-04 23:34 ET

EUR/USD continues to be an difficult beast for me to tame as the pair went into snooze mode before a shot of volatility higher told me it’s time get out.

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 I entered my trade, we saw better-than-expected US ISM manufacturing PMI, which I thought would help give EUR/USD another boost lower. Unfortunately for me, the 1.3140 – 1.3150 was a major barrier lined up with buyers and/or profit takers. After the failed break lower, EUR/USD went into consolidation mode until the very end of the Wednesday European trading session when–while a lacking of major news–we saw a spike higher. My best guess is that we probably saw traders squaring away positions ahead of Thursday’s ECB monetary policy decision and Friday’s US jobs data. After seeing the initial spike, I closed right away manually at 1.3195.

Total: -25 pips/ -0.15% loss

Throughout the entire trade, I held on because I didn’t see a reason that it was invalidated, especially with positive US ISM mfg PMI and mixed EU services PMI data. Also, after closing too early on my recent GBP/USD short trade–only to watch it drop to my max target–I didn’t want to be too hasty and miss out on profit since there was nothing telling me buyers would take control again.

In hindsight, that strong support at 1.3150 was a pretty good clue that I should probably exit early and as the market went into consolidation mode. In the future, I’ll take both as cues to adjust my risk or get out.

So, another tiny hit to my account, which means I get to live and trade another day. Maybe I’ll even eventually get a win off of EUR/USD…Ha! I’m going into watch/reactionary mode with major tier 1 events to close out the week. Stay tuned for observations and new ideas by following me on Twitter and Facebook! Good luck!

Trade Idea: 2013-09-03 7:47 ET

Good morning forex friends! I’m starting off what could be a chaotic week in the markets with a technical short on EUR/USD? Will the break of Friday’s low draw in more sellers?

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This is a simple technical trade to play the current broad strength we’re seeing from the Greenback, specifically in EUR/USD. Despite recent positive data from the eurozone (even as recent as positive Spanish and Italian Mfg PMI on Monday), the Greenback continues to attract buyers. Now that we’re seeing a sustained presence under Friday’s low, I think we’ll see more USD bulls come in now that US traders are coming off holiday.

My stop is above descending trend line and the next major handle higher, 1.3200. If the market gets up there, it’s a clear sign my trade is invalid. My profit target is the next minor support area that attracted a good amount of interest mid-July. Here’s what I am going to do:

Short quarter position EUR/USD at 1.3170, stop at 1.3210, profit target at 1.3120

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 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.25:1. Of course, anything can happen in the forex markets, especially with a major US economic data point later in the session–it’s a good thing I’ve got a tight stop to limit my risk if I’m wrong!

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