Will the Top of the Range hold on EURUSD? – Trade Closed

Trade Closed: 2010-09-14 4:30 pm ET

PoD Chart

Well, we didn’t have to wait long to get the answer to my question on the EURUSD range. The area held for less than a day as a positive surprise in US Retail Sales brought a broad based USD sell off.

Apparently, it was a real surprise to traders as retail sales excluding autos came in at 0.6% vs. the forecast number of 0.4%. This brought a sell off of the Greenback, which I think was also fueled by a strong rally in gold and other commodities as the expectation of monetary easing through bond purchases by the Fed was priced in.

This was the catalyst traders were looking for to break above the barrier and push EURUSD to 1.3000 and stopped me out at 1.2965

Total: -65 pips/ -1.0% loss

So, a frustrating trade to start the fall season as I was up about 1% at one point. I feel this was a good trade, but my mistake is that I should have locked in profits ahead of the retail sales report.

Now, that the pair has broken the top of the range, I look to go long on a retest of that area around 1.2900 and target the summer highs around 1.3300. Stay tuned!

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Trade Idea: 2010-09-13 11:51 am ET

PoD Chart

Good afternoon Forex friends! I see a great resistance play setup on EURUSD today. Will it hold or is EURUSD ready to break and retest summer highs around 1.3300?

I’ve got the four hour chart up and I have highlighted where the pair has held as resistance. 1.2900 has been strong and with stochastics indicating overbought conditions, that area may hold again if buyers run out of steam. Simple setup, right?

I also highlighted the bottom of the range, around 1.2650, as it is a good area to take profits if traders play it as support once again.

Fundamentally, EURUSD is rallying today on risk tolerance as regulators gave banks as much as eight years to meet the Basel requirements, and on news of China’s industrial output surge. This sentiment should last throughout the rest of today’s trading session and push EURUSD to the top of the range, but in an environment of “unusual uncertainty,” each new economic release on the forex calendar can shift the market’s directional bias on a dime. Because of this I think EURUSD will stay range bound until we get a positive global growth catalyst strong enough to break that top.

So, I look to short at the top of the range, I’m going to keep my stop tight at half the daily ATR of 120 pips, and target the bottom of the range around 1.2650. This gives me a reward-to-risk ratio of around 3:1 if I hold the entire position to that level and take profits at my first target. Here’s what I am going to do:

Short EURUSD at 1.2900, stop at 1.2965, pt1 at 1.2775, pt2 at 1.2650

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

If I do get stopped out, I may go long depending on the catalysts for the break and as I do not see any resistance on the pair until 1.3300.

Thanks for checking out my blog and stay tuned!

  • MedicalChew

    I was on the same wagon as you (not following signals, saw the same thing you did), I guess that’s one lesson learnt around reports

  • MedicalChew

    I was on the same wagon as you (not following signals, saw the same thing you did), I guess that’s one lesson learnt around reports

  • Pipcrawler

    There’s a lesson to be learned everyday…it never ends! haha Thanks for you comment MedicalChew and hopefully we’ll get the next one! ;)

  • Pipcrawler

    There’s a lesson to be learned everyday…it never ends! haha Thanks for you comment MedicalChew and hopefully we’ll get the next one! ;)