Good morning traders.
No great shakes yesterday as expected in the lead up to the ECB on Thursday but we did at least get a long trade off S1, the first in 3 trading days for our model strategy!
I posted via twitter and in the comments section of this blog how I managed it. I took profit at +20 as it moved back up into some resistance. It did go on to complete our model strategy target of +26 so however you managed it, it should have been a winner.
With regard to the macro environment (see Mondays post ) not much has changed. However, here´s a quick update to my thinking.
Today’s price action with its test of our S1 and diagonal trend line on the daily and subsequent sharp reaction suggests indecision in the market.
It was not a significant move by any stretch and S2 was (is) a more definitive level, but the way it didn’t hold at the level for any amount of time gave me pause for thought.
In which case an alternative to the downside scenario I wrote about on Monday based on an expected move tomorrow on a dovish Draghi and a widening of monetary policy divergence, could be that the market waits to see what the FOMC next week has to say before making any move.
If the Fed is equally dovish we could get a cancelling out of both sides lessening the case for a strongly weaker eurusd.
It is also worth a look at the USDx (US dollar index) as we move into Thursday.
You can see from the chart below that the USDx is running into some resistance up here above 96.00 which if it plays out lower, would act against lower eurusd prices.
As with all aspects of trading its never straightforward and there are always opposing scenarios, differing chart interpretations and views on timing.
This is why my trading is largely agnostic as I have said many times and is the reason I prefer to not to be tied to any particular macro or longer term view when it comes to intra-day trading.
In my view probabilities are best viewed from the chart levels and the price action on the day. So while I may hold a macro view or at least have an understanding of what could play out (which many times could be opposing views), I will take the levels every-time over any macro analytical viewpoint.
If I´m wrong so be it, I´d rather be profitable. We are traders not analysts and the only thing that matters at the end of the day is to make money!
So on that note, let’s look at the charts for today.
The Daily Chart
The daily chart above shows how it reacted at the diagonal trend line and formed a doji candle almost exactly opposite to the one formed the day before.
All this suggests to me at the moment is that the market is indecisive and is waiting for some reason to test higher or lower (or remain stuck in the range :)).
The Hourly Chart
Levels as per.
The hourly chart as you would imagine is a more granulated version of the daily and tells me little about direction of travel.
Consequently, we stick to our levels, watch price action and take our shots where we have a greater probability of a reaction occurring.
As I write it looks like a test above into our Resistance levels is more likely at least at the start of the day but I will trade what I see and what unfolds.
Have a good one amigos and remember the ECB is tomorrow so today could be all about positioning in the run up to the event.