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Close Open Orders: 2009-11-11 11:50

PoD Chart

Good morning! Not much movements in the markets since I dropped in orders to go long EURUSD, but we did see the pair dip a bit lower to the 38% Fib area and rally up to the minor resistance level notated earlier at 1.5050. With the pair now dropping back and breaking the rising trendline, I have decided to close out my trade and look for opportunities else where.

Close open orders. No trade.

It was another case of having an entry that was a bit too conservative. Looks like I’ll have to be a bit more aggressive, especially on days where major news is not expected to affect the markets like we saw in the past few days. And that’s all we can do – keep learning and adjusting to this ever changing market!

Before I go, it’s Veterans Day in the US, so I just wanted to give a shout out to all of those who have served, not just in the US, but all over the world! There is something special about someone who volunteers to serve others and their country, and they should be commended for their commitment and sacrifices. So, if you see a Vet… shake their hand, get’em a beer, or just say thanks. Happy Veterans Day!

Trade Idea: 2009-11-09 17:57

PoD Chart

Good evening Forex friends! There’s a nice little trend retracement setup in EURUSD that may be a new opportunity to jump in the recent US Dollar sell off. What will push the EURUSD trend higher continue?

On the one hour chart, we have a few technical setups going on. First, we can see that EURUSD has run up to a major psychological area, 1.5000, where it is currently stalling its move. With stochastics indicating overbought conditions, we may see the pair retrace back a bit to an area of previously broken resistance-turned-support around 1.4920. I used the Fibonacci retracement tool, and we can also observed that a 50% retracement of the latest swing move from around 1.4815 to 1.5020 lines up with the broken resistance and rising trendline. I feel that area will be closely watched and reacted to if retested. I will go long in that area.

A quick look at the fundamental and risk environment, and we can see the US Dollar carry trade is still in play as we heard from the FOMC last week that inflation is not a concern. It is speculated that US interest rates will remain low and stimulus measures will be extended well into 2010. To me, this indicates the economy isn’t getting any better, but does that mean a return to risk aversion? Apparently, not right now as traders continue to borrow US Dollars and buy other assets like commodities, equities, and higher-yielding currencies. I will play this sentiment for now until I see a change in market behavior.

For this week, we will see potentially market moving data on the Forex calendar from both the eurozone (ZEW economic sentiment on Tuesday) and the US (Initial Claims, Trade Balance, Consumer Sentiment, etc). Bad reads may bring back risk aversion and an opportunity to jump into a EURUSD long position at a better price, while positive reads will probably push the pair higher. Also, we have seen positive earnings from US companies which may continue to fuel the risk tolerance fire further.

So, if EURUSD does pull back to the area I have highlighted, I will go long and my stop will be 130 pips (daily average true range) and I will target the next resistance level around 1.5050 and beyond. Here’s what I am going to do:

Long EURUSD at 1.4920, stop at 1.4790, pt1 at 1.5050, pt2 at 1.5180

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

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