Will EUR/USD Settle into a Short-term Range? – No Trade

No Trade: 2012-06-22 04:40 ET

Thanks to bad global manufacturing data and bank downgrades, it was risk-off all over the place between Thursday and Friday’s trading session. EUR/USD quickly visited the 1.2700 before dropping; unfortunately I didn’t get to catch it. Here’s what happened…

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

PCDPOD20120621.review.png

As I mentioned earlier, we got poor manufacturing numbers from around the world yesterday, most notably from Germany and the US. We also saw weak initial claims data and existing home sales data from the US, indicating that the “US recovery” is running out of steam. Top it off with Moody’s downgrades of 15 global banks and the outlook isn’t shaping up too well. With no QE3 to save the day from the Fed, it was all downhill for risk assets like equities, commodities and higher-yielding currencies.

As for the EUR/USD, the pair did tick higher as shown in the chart above, apparently touching the 1.2700 area, but it was there so quick that my orders didn’t get a chance to trigger. This is super not cool because yesterday’s events was enough to push the pair all the way to my profit target at 1.2560. Grrrrr! Well, with the weekend quickly approaching, and seeing how my trade idea ran without me, I’ve decided to close my open orders to short EUR/USD at 1.2700. No trade.

What a week it’s been for me as I had two ideas that didn’t pan our for me. First, I closed my short USD/CHF trade well ahead of the big drop and missing some good pips. Again, I think it was the right move given the uncertainty of whether we’ll see QE3 from the FOMC on Wednesday. Second, the market missed my short order on EUR/USD by a couple pips, dropped and eventually hit my profit target for a 1.86:1 return-on-risk. It’s just not my week I guess, or even my quarter, but I do feel good that I did well with my analysis and trade planning. I’ve just gotta do a better job of executing, especially after I’m in the trade.

Well, that’s probably it for me this week. I really appreciate you checking out my blog. Come back next week for new ideas and market observations, and follow me on , and if I do adjust, be sure to follow me on Twitter and Facebook so that you don’t miss a thing. Thanks again and have a great weekend!

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Trade Idea: 2012-06-21 05:26 ET

Oh snap, the summer has officially begun! And with the “Grexit” event and FOMC decision behind us, is it time for the EUR/USD market to calm down and settle into a summertime range?

PCDPOD20120621.png

As I mentioned earlier, the much anticipated Greek weekend vote has passed (without a huge reaction), and the FOMC disappointed risk hungry traders yesterday by not issuing a new round of quantitative easing. Instead, they extended the Operation Twist program (previously due to end June 2012) to the end of the year.

It should also be noted that the Fed downgraded their growth forecasts and that they are prepared to ease further if the labor market lacked “sustained improvement.” Basically, the Fed has left the door open for uncertainty to continue.

The continued uncertainty should leave traders reluctant to take big positions for now, and given that we are headed into the “doldrums” of summer, we may see range bound conditions for the time being. And given that I’m still bearish on EUR/USD because of the difficult position that Europe is still in, I look to play the top of the range for a short-term play.

On the 15 minute chart above, we can see this week’s price action. The 1.2700 – 1.2750 area held pretty well, even after what should have been a euro bullish outcome for the Greek vote. And even though we didn’t get QE3, extending Operation Twist should have been pretty bearish for the Greenback, but that area held. So, I’m looking to short EUR/USD on another retest of that area to play my bear bias on Europe. Here’s what I am going to do:

Short EUR/USD at 1.2700, stop at 1.2775, profit target at 1.2560

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

For this trade, I’m only risking 0.50% of my account as I may cut it short ahead of the weekend, and with this trade structure, my potential return-on-risk is about 1.86:1. I’ll be sure to keep a close eye on the upcoming economic events with our trusty forex calendar, and if I do adjust, be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

6 comments

  1. Ichwan

     I am now more understood about trading.
     My entry  is short on EUR / USD
     open trade  : 1.2668
     stop loose   : 1.2739
     target         :  1.2555
    your analysis  is almost the same with me. The different is I can find for sure my sl.
    So I used yours to compare my trading plan.
    please keep your best analysis 

    Reply

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