Looks like I got faked out on this textbook technical setup after both the euro and the Greenback saw big sentiment shifts in the past week.
Trade Review: Head & Shoulders Break on EUR/USD?
After originally shorting on a neckline break of a classic head and shoulders pattern, EUR/USD pretty much went no where for the next couple of weeks at the end of October. And it was likely the shift in sentiment on the potential for the U.S. tax code overhaul to get done over the last week that had U.S. dollar traders flipping back to the short side.
Couple this move with today’s positive Euro zone data that included positive GDP reads and economic sentiment data, the euro went into bull mode, especially against the Greenback.
This lead to a break back above that neckline on the four hour chart of EUR/USD above, and eventually to a break of the lower highs pattern that finally had me saying, “I’m out.” With that, I decided to close manually (1.1800) in the afternoon U.S. session to limit my max loss:
Total: -150 pips / -0.44% on 0.50% risk
After a little bit of thought, I probably could have closed a bit earlier with the first signs of the tax reform stalling last week and the dollar reacting by pulling back from recent gains–doing so likely could have squeezed out a tiny gain had I done so. But I didn’t and this small loss is the result of that decision. I don’t think I would have changed what I would have done though because I’m still a bull on USD over EUR, but for now the positive sentiment is on the euro, deservedly so with the good data the Euro zone continues to pump out.
So now, I’ll likely look for a bullish euro trade, and until then that leaves me with my AUD/NZD short as my only idea in the works. Stay tuned for an update this week on that idea and a potentially new one as the market develops. Until then, good luck and good trading!
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