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Trade Idea: 2011-6-22 2:19

EUR/USD 1-hour Chart

I’m doing it again. I’m going to buy the dip! This time, however, it’s gonna be EUR/USD. While my plan on GBP/USD didn’t work out too well last week, I’m hoping this time I’ll get lucky!

The new development in Greece’s bailout debacle is the main reason behind this long trade. Yesterday, Prime Minister George Papandreau garnered a positive vote of from Greece’s socialist government, indicating that Greece could be eligible more funds.

The only thing that is left is for the government to agree to a 5-year austerity package. I must admit, compared to last year, things are looking pretty good for the euro right now!

I’m also expecting the upcoming FOMC interest rate statement to provide support for my long trade. From my experience, whenever the FOMC announces its decision on interest rates, the dollar tends to fall on bearish comments.

On the technical side of things, it looks like EUR/USD is on an uptrend as evidenced by the higher lows which form that rising trend line. I’ve also noticed that the pair has been tapping new highs for the past couple of days.

However, I’m not gonna jump in on this trade just yet. Looking at Stochastic, it looks like the pair still has some room to trade a bit lower. Using the Fibonacci retracement tool, I noticed that the 50% level lines up nicely with the trend line and the minor support and resistance area.

So, this is how I’m gonna play the setup:

I’m gonna wait for reversal candlesticks around 1.4320 before jumping in. If my trade gets triggered, I’m looking to take profit at 1.4500. As for my stop, I will set it just a few pips below the week open at 1.4260. My trade has a 3:1 reward-on-risk.

Let’s see how this trade works out. Cross your fingers for me! Till next time!

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