Playing my short fundie bias on the euro today with this longer-term fundie & technical setup on EUR/USD.
Support Break on EUR/USD
Keeping it super simple today with this bearish chart setup on EUR/USD. On the daily chart above, we can see the pair breaking the rising ‘lows’ pattern that’s been going back to November, which happens to also be around the major psychological level of 1.1300. I think if the bears can sustain around or below the 1.1300 handle, momentum can pick up to the downside based on some insights gained today on Europe.
Recent negative reads from European economic leading indicators like the purchasing manufacturers surveys point to what’s already been weakening economic data and a weak outlook of slower growth, which was cited by the European Central Bank at their monetary policy meeting today. Given the data and the financial market uncertainty that has been brought on by geopolitical drivers (e.g., Brexit, protectionism, slower global expansion, etc.), the idea of rate hikes by the ECB are likely fading away.
From the U.S. side of the pair, economic data still remains relatively strong, with record low unemployment claims today and strengthening PMI survey data. Sure, the government shutdown is likely to have a large negative effect soon, but relative to the euro, the U.S. dollar is still pretty attractive given its safe haven status and positive interest rate differential.
With all of that said, I’m shorting EUR/USD on this simple technical break for a longer-term position trade that’ll likely last for one to three months. I’m starting with a nibbler position at market, and I’m keeping the option open to go up to my full 1% risk limit on both a bounce higher or if the market continues to go my way. My stop will be the two times the weekly ATR from first position price, and my target will be the major swing lows that held as support back in 2017 and 2015. Here’s what I’m doing:
Short a half position EUR/USD at market (1.1303), max stop at 1.1625, max target at 1.0500
I’ll be risking only 0.50% of my account to start, 1.00% if I put in a full position later. My potential max return-on-risk is about 2.5:1 and of course, I’ll look to add further to the position or I’ll adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on how the driving themes develop in the global markets.
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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