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Close Trade: 2009-05-08 14:55

Good afternoon! After waiting a few days of waiting, my short position was triggered as EUR/USD rallied after today’s US employment data. Unfortunately, 1.35 did not hold for very long as the US Dollar continued higher to above 1.36. As the trading week closes, I have decided to close out this trade and take the small hit going into the weekend.

Close trade at market (1.3624).

Total: -124 pips/ -0.62% loss

For a bit, my trade was looking good as there was a brief sell off after 1.35 was hit. I should have taken profit then given the weak jobs data, but I thought I could squeeze out a bit more pips. Unfortunately, given the fact that it was a better number than last month, risk tolerance grew fast as money flowed out of the safety of the US Dollar and into higher yielding currencies.

So, that’s it for the week. It looks like risk tolerance is here to stay as the worst seems to be behind us….at least for now. I’ll look to jump in the trend next week, until then – have a great weekend!

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Trade Idea: 2009-05-04 16:41

PoD Chart

Greetings everyone and welcome back to another wonderful week of Forex trading! As I stated in my last post, I am going to revisit my short bias on EUR/USD this week, especially as we are see a bit of divergence on the charts.

I have the four hour chart up, and I have highlighted where the pair is showing regular bearish divergence as price action creates higher “highs”, while stochastics is giving us lower “highs”. Divergence tends to be a very early indicator, and with stochastics not quite back into overbought territory, I’ll wait to see if the pair hit 1.35 before jumping in. I like that level as it seems it has been an area of interest in the recent past. In the most recent visit to that area, sellers won out the battle and the pair dropped back to 1.30 and lower.

Fundamentally, there’s a lot going on this week in the economic calendar. Most notable includes the ECB interest rate decision, US stress bank test results, and US employment data. Swine flu concerns are also still on the table of potential market movers.

Again, I am still in the camp that we haven’t seen the worst parts of the economic recession, but apparently the markets are moving on “things are getting less worse” type data. This may or not continue to be the case as we continue to get new data this week. Also, my friend Jack Crooks gives some startling data and thoughts on the Eurozone over at Currency Currents which supports my bearish euro stance. Check it out!

So, I look to short EUR/USD on divergence and potential resistance at the psychological area around 1.35. My stop will be 200 pips, just a bit more than the average daily range of around 170 pips. My targets will be 1.33, 1.31, and beyond. Here’s what I am going to do:

Short EUR/USD at 1.3500, stop at 1.3700, pt1 at 1.3300, pt2 at 1.3000

Remember to never risk more than 1% of any trading account on any single trade. Adjust position sizes accordingly.

Stay tuned!

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