Trade Closed: 2013-06-12 12:40 ET
My technical trade met its demise today as USD bears maintained control and pushed the Greenback lower against the broad market.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Throughout the morning Asia and European session, it looked like 1.3300 would be the line in the sand where EUR/USD bears would take back control; we event got a doji as another confirmation of a possible turn. But it looks like US traders were very bearish on the Greenback and began to price it in as soon as the markets opened in New York. Needless to say, the market hit my stop at 1.3345 and took me out of my trade for a small loss.
Total: -108 pips/ -0.50%
In hindsight, I may have put too much emphasis on the technical framework that matched what I think of as average summer behavior for EUR/USD, which is typically “no clear direction.” Clearly, this summer is probably like no other with the uncertainty of the “Fed taper” and other big changes to global monetary policy this year.
Now that the pair has broken previous resistance, I’ll look to possibly go short on the US Dollar. The momentum is strong and it looks like the trend may continue across the major pairs. Hopefully, it will continue and that I can catch it to help me break out of my Q2 funk. Stay tune and thanks for checking out my blog!
Trade Idea: 2013-06-11 9:16 ET
Good morning forex friends! Today, I’m going with a divergence signal on the longer-term EUR/USD chart. After a nice rally, is it time for euro bears and Dollar bulls to take control?
I’ve thrown up the four hour chart of EUR/USD, and we can see a case of divergence between price action (higher highs) and the stochastic indicator (lower highs). This is occurring at an area of previous strong resistance in a ranging, summer environment.
With the exception of US retail sales (which is forecasted to be higher than the previous month read), this week’s forex calendar is void of any major economic data points. So, I think technicals may have a bit more weight in influencing price action this week.
I’ve gone short at market with a stop not too far above Friday’s highs (around 1.3305); I think a break above those highs would quickly draw in buyers of the pair because of its recent strength. And my maximum target is the very strong support area around May’s lows. Here is what I am doing:
Short half position EUR/USD at market (1.3237), stop at 1.3345, maximum profit target at 1.2850
I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 3.5:1. The markets have been pretty schizophrenic with sentiment lately, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!