Good morning traders.
Last Friday we were a little unfortunate with our short from the S1 zone for our model strategy. Depending on exactly where you entered within the S1 zone you could either have recorded a winner or a loser as price spiked up on the US advance GDP data to take it to the edge of our stops.
However, if you entered later you wouldn’t have run the risk of a stop out but it was tight whether you recorded a model win of +26. In which case I will count it as a -13 loss as I´m not interested in gilding the lily here. We either win or lose on our model ´set and forget strategy´ – no messing about in the middle. If you were scalping however you should have made money.
Updated model and max strategy performance here.
NB: we have only had 4 weeks since the beginning of the year where we have not made money on the model strategy and only one where we have actually lost money. We have been positive every week on the max strategy. I think this is testament enough to the fact that levels work for eurusd. Know where to trade, set your limits and stop orders and let the market do the rest.
The significant change that occurred last week is that US equities are closing in on new all time highs in the S & P. A couple more handles and we are there in absolute terms and we have already hit new ATH´s on a closing basis. Nasdaq is already there of course with the Dow and the Russell with work left to do. We are now facing either a continuation or a pull back which will impact the USDx and thus the eurusd.
My take on this is that we are probably in for more upside in the long run as the grind up continues. Maybe we get a double top pullback in the short term but the conditions look favourable for more of the same.
In which case higher for longer favors a stronger USD and lower euro as does continued monetary policy divergence. As I have said in the past – I´m not much bothered about the fundamental view because that’s not what we trade on a daily basis but it is useful to form a view for yourself to test out different scenarios.
Readers will know I watch the USDx very carefully as many good trades on the eurusd come directly from the USDx itself regardless of the long term picture being drawn by the index. Last Friday was a good example.
We were trading up in the yearly highs above the 98.00 level when the USDx came down into support at just about the same time the eurusd came into resistance. I am aware that trading either or both the eurusd and the USDx is merely tautological as one mirrors the other. The index is the inverse of the other and the euro makes up approx. 57% of the index.
However, when we see the USDx coming into decent support or resistance at the same time as the eurusd is tagging good support and or resistance – its a good bet that we are going to get a decent trade in the eurusd. It adds more confluence if you like. If you can I would recommend overlaying the USDx onto your eurusd chart – it helps me greatly!
The week ahead
We have a busy week ahead with much more data on the slate for this week than for last. We have EZ flash GDPs and CPIs on Tuesday, FOMC on Wednesday with NFP out Friday. Stay tuned for some movement – I hope :).
The Daily chart
We had a quick dip down into the low 1.11s Friday and closed out the week with an indecisive doji. We still have plenty of room on the downside but depending on what comes out of the data this week we may get some consolidation. 1.12 and whether we can get a daily close above this level remains the line in the sand. If we stay below this level 1.10 is in the picture. Bias is neutral to bearish but we will trade our levels each day regardless of the higher time frame fundamentals.
The Hour chart
Levels as per.
Main resistance comes in at the 1.12 level / area with main support around the 1.1120s for today. I will be looking to short any run up above the spike high from Friday in the first instance or any dip into support. Japan is out for holidays today (and I believe for the rest of the week) which will effect yen trading and could have a knock on effect across the board via low volatility. Not that it can get much worse in terms of volatility but something to bear in mind.
Have a good one amigos :).