Looks like the euro zone isn’t on the fast lane to recovery after all!
Yesterday the euro zone PMIs disappointed the investors’ already tempered expectations. Though Germany’s numbers showed slight improvements, it just wasn’t enough to convince the euro bulls to step in.
As a result, EUR/CAD dropped below the Fib areas that we’re watching, enough to hit my limit order and my stop loss.
I’m not gonna be too harsh on myself on this trade as I’m still a bit rusty on trading crosses. I also probably should’ve been quicker at removing my orders when I found out that most of the euro zone’s PMIs printed weak.
But next time whenever I set my profit and stop loss levels I’ll keep in mind that crosses could have more volatility than the major pairs.
I hope none of you out there got stuck with a long euro position! I asked over Twitter about what to do when good technical setups go against your fundamental biases.
A lot of them are technical traders, so many of them want to follow the setups instead. But this trade has taught me that when fundamentals and technicals aren’t lining up, sometimes it’s better to just stay by the sidelines.
Have a great weekend, everyone!
Trade Idea: 2013-02-21 02:20
Eep, it seems that comdolls and dollar pairs are all over the place these days and I might be better off playing a cross pair instead. Fundamentals and monetary policy expectations seem to be driving price action anyway so I picked a pair whose economies seem to be having different economic outlooks.
The euro rally seems to be gaining traction these days (except against the Greenback, which is enjoying the post-FOMC minutes party) as the euro zone continues to recover from the debt crisis that plagued the region in the past few years.
The ECB is focusing on growth and recent economic figures reveal that the region is on a positive track. For instance, the German and euro zone ZEW economic sentiment figures reflected a strong rebound for February.
In Canada, manufacturing sales and foreign securities purchases came out weak. This dampened demand for the Canadian dollar, which doesn’t seem to be finding its usual support from rising oil prices. Eventually, this could result in weak spending and overall growth. And with BOC head Carney set to exit, I’m thinking that there might be fewer hawks in the central bank!
As for technicals, I’m eyeing a potential retracement to the 50% Fib. It is in line with the 1.3460 level, which has proven to be an area of interest in the past. Of course I’ll wait for euro zone PMIs due today as confirmation that the euro zone is getting a stronger footing.
Here are the details:
Long EUR/CAD at 1.3460, stop loss at 1.3420, pt1 at 1.3600 for a 1:1 reward-to-risk on my initial position.
I plan to move my stop to breakeven once price hits 1.3600 and hold on to the trade if the pair makes a strong break above that psychological level. I’ll be risking 0.5% of my account on this one.
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