Good morning traders. Hope you all had a restful and pleasant weekend.
Well Friday certainly stirred up the dust. Rather than dipping below the 1.13 handle to test lower as I was expecting we didn’t see any bearish price action at all and we closed the day back above 1.14. So much for expectations!
Sometimes trying to be an analyst is actually tougher than trading:). However, it´s always worth the effort as the thought process behind your analysis adds to your understanding of the macro economic environment and builds confidence. But what is equally important is to be able to admit when you´re wrong and get in line with price action when your views don´t pan out.
Consequently we had two losers on the short side on Friday from R1 and R2 which meant we ended the week with only +26 pips from the model strategy.
But hey, we ended up positive again so that´s no problem. We have made money for 3 weeks in succession from the kick off of this year so that is just fine with me. And remember this is really a set and forget strategy. If you were at your charts and able to trade the price action intraday you should have done much better.
For example when price moved up above the diagonal trend line we have been watching for a couple of weeks it came back down and tested it at R1 (todays S2) and gave a good signal to go long on the H1 chart at this point. This is what I mean by trading the price action because we can use our levels interchangeably as either S or R depending on the pa. See the hourly chart below.
So what to expect for this week?
I am not sure is the honest answer. The close on Friday back above 1.14 changed my view of lower prices but we really will have to wait for the FOMC rate decision and press conference on Wednesday to get a clearer picture. Also bear in mind Draghi is speaking today at 3.00pm GMT which could push price around.
In which case I´m not going to try and suggest a direction. I will pick out the levels and that´s what we will trade (as well as the price action).
The Daily Chart
A quick glance at the daily chart reveals that we have a strong confluence of the yearly and monthly open level, good range resistance and the 61.8% Fib at around 1.1465. That could act as a magnet and a good potential resistance prior to Wednesdays FOMC. So if you are working from the daily look out for price action around here. Similarly the 1.1360 ish level to the downside looks like decent support with good horizontal and diagonal trend line support.
The Hourly Chart
Levels as per.
Have a good Monday :).