Partner Center Find a Broker

Trade Idea: 2011-5-24 4:05

EUR/USD Hourly Chart

From what I’ve heard from Pip Diddy, S&P and Fitch downgraded their outlook for Italy and Belgium yesterday. Consequently, this sent the euro trading lower against its counterparts as it fueled speculations that a debt contagion is already spreading to other countries. Yikes!

As if that’s not bad enough, the protests against the government’s budget cuts continue in Spain.

Ugh! With all these downgrades, talks of a debt contagion, and protests against austerity measures, how am I supposed to show the euro some love? That’s it! I’m rooting for the dollar.

On the technical side of things, I think it’s pretty clear that the pair is a downtrend. For one, it broke the rising trend line support last Friday. And second, the pair has lost for two straight days already, telling me that the market is bearish on it.

As much as I want to jump in right now, I have to be patient. I’m waiting for a pullback between the 38.2% and 61.8% Fibonacci retracement levels.

So what’s gonna be the catalyst? The only X-factor event I see for this week in our forex calendar is the U.S. Preliminary GDP report for the first quarter of 2011. I’m thinking that if it comes in better than expected, we may see a risk rally in the market.

However, I don’t think that risk appetite would last. I mean, it’s not like a positive U.S. GDP report will make Europe’s problems go away, right? That’s just my two cents though.

So my plan is to wait for reversal candlestick patterns (e.g., shooting stars, dojis, bearish maruzobu, etc.) before entering. I have no intention of pulling off a set-and-forget move on this setup. Who knows, risk appetite could stay for a while and stop me out.

I’m excited for this trade to materialize. I haven’t had a position in more than a week now, and my account needs some pips! Boo yeah!

Are you guys trading today? Share your trade ideas through Facebook, Twitter, or write them in the comment box below.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.