- Today EUR has been largely selling due to the strength in USD and the reduction of the sentiment. Remember that EUR does not really have any fundamental strength to begin with, and it was strong sentimentally mainly because USD was weak. Now since USD has gained its strength back, on top of that, we also had good ADP Non-Farm employment number. The whole USD negative sentiment was the talk from FED to try to keep the exchange rate low, however, not only USD is the only currency with any possibility to have a rate hike in 2016, it is also the only currency that has a strong fundamental base for a safe heaven currency. And as we’re approaching BOE rate decision and Friday’s NFP which expected to be neutral to positive. Technically we went and closed above 200 EMA with large green candle and today we have completed reversed this position to close below 200 EMA with a even larger red candle. This is a very strong selling power.
- The catalyst could be the NFP for this Friday which will be a good timing to enter and trade into the news. Tomorrow’s BOE might effect USD but it will also effect EUR and they will most likely be in the same direction with buying power if BOE cut rate and selling power if BOE hold rates. So that will reduce our risk.
- We’re in an downtrend and reverse range, there is still downside to go but watch out for 1.09 handle in the short-term.
- The risk is the disappointed NFP this Friday which might completely changed the sentiment and direction. As long as the NFP remains neutral, we should be able to see further downside movement in EUR/USD.
- I’ll manage it with mid-term swing trade and really see what happens with the NFP and perhaps to an early exit if the datas are deviated negatively.
- This is a good trade to enter now as we have less catalyst to effect it from now until Friday NFP which will be 48 hours away.
SL @ 1.1321
alternative pair to choose from will be SHORT EUR/JPY
same idea as we’re shorting the weakness of EUR both sentimentally and fundamentally and JPY is still in a very favourable position to buy.
and same risk criteria to BOE decision as both JPY and EUR are considered safe heaven currencies nowadays.
the difference is really the fundamental side of JPY & USD as JPY has strong sentiment but weak fundament and USD has strong fundament but often suffers weak sentiment.
The good reason to choose EUR/JPY instead of EUR/USD is to avoid the NFP volatility on Friday.
The bad reason is that we’re at all time low in EUR/JPY and we also have BOJ intervention risk at the lower handle, so this is not a good risk/reward trade in comparison to EUR/USD.
SL @ 116.51
we got in today @ 1.1130
still expect to see it goes down further, however, the BOE rate decision has now helped EURO to gain strength in this moment, meanwhile, USD is still in a negative sentiment especially if tomorrow’s NFP is a negative surprise.
So i’m less convicted to add on any position now but i’m still convicted to hold it as my SL is far away, in mid-term perspective i’ll still expect to see EURO drops lower than USD.
if you’re in this trade, I’ll prob just get out because now both EUR & JPY will act the same as safe heaven currencies, and they will most likely move with the sentiment together. On top of that, there are no significant central bank news coming out that might shake this pair. If anything, ECB might maintains the wait and see attitude while BOJ might actually try to talk down the JPY by any measures since JPY has been surged past few days after the disappointment stimulus package.
so you actually have risk of no movement and risk of reversal.
I will not be in this trade anymore if i’m in now.
Technically we have a very typical 3 crow reversing candlesticks signal. yes get out!
we have a strong sentiment into USD and that helped our EUR/USD trade, however, i dont' see any new catalyst to drive EUR down but we might have new catalyst to add on more power into USD, or on the contrarily, we might lose the strength in USD if Thursday & Friday data from USD is negative.
We decided to tighten up our Stoploss because technicallly we have an insdie bar where the top will be above 200 EMA, and i think for the next few days there shouldn't be any new catalyst to drive USD down so our new stoploss of 1.1210 will be more than sufficent than the daily range of 95 pips.
move SL to 1.1210 because it's above the handle and 200 EMA