The ECB meeting has come and gone without much fireworks, but I’m still biased in favor of the Greenback over the euro. Here’s one last setup to close out the year!
EUR/USD Short at Resistance Area
On Tuesday, I was looking for a big pop in volatility for EUR/USD in reaction to today’s monetary policy statement from the European Central Bank but price action was relatively subdued as most of the rhetoric came in as expected. Arguably, though, the event may have been a bit more dovish than expected as they stated that economic risks are “moving to the downside” due to the slew of global concerns ranging from market volatility to geopolitics, prompting the central bank to lower their projections for their outlook on growth and inflation. The euro was hit lower but no major momentum came from today’s top tier event.
Given the ECB’s lean towards more dovish sentiment and the possibility of the Greenback getting some support ahead of next week’s FOMC statement, I’m still bearish on EUR/USD for a medium to longer term position, but I’m only gonna take a trade if I can get in at the right price.
For me that’s on a retest of the recent strong resistance area highlighted on the four hour chart above. And if the market can’t make it up there, a downside break of the rising lows is a strong enough signal to take a nibbler in case that turns into a consolidation breakout type scenario.
For now, I’m only putting orders up to play a bounce higher to the resistance area, with a max stop of around a one weekly ATR, and my target will be the November swing lows for a nice potential return-on-risk. Here’s what I’m doing for now:
Short half position EUR/USD at 1.1400, max stop at 1.1550, max target at 1.1215
Again, I’ll be risking only 0.50% of my account and my potential return-on-risk is about 1.23:1 . I will likely add to this position if downside momentum picks up around my max target, which is a possibility if we see no hints of the FOMC refraining from additional rate hikes in 2019 during next week’s statement.
Of course, with other major themes driving markets, additional top tier economic data releases, and fast developments happening in geopolitical news, I will not hesitate to adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on what happens and how the markets react.
Stay tuned and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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