Mark Wogan: Look out below ?

Good morning traders.

We had some decent movement in our pair yesterday which was welcome – although we are still at sub 50 ATR on the daily.  After giving us a couple of good scalp entries initially below and then above the Asia range during the morning we then traded down for the rest of the session. We looked to be on course for a test of the 1.1175s low before it turned back up from 1.1190.

It would have been useful for us if the 75s had been broken because it might have given us some conviction that it wanted higher or lower as its become somewhat of a barrier to moves. We may get another test today.

From our results pov the two scalp entries were good opportunities to make +15 on the first and at least a model result of +26 on the latter. In fact had you taken the second ´scalp´trade there was a potential for 50 plus as it gathered speed to the downside.

My method on scalps is to take some off the table at around +10 move stops to BE and let the trade run out either way. I am not one who advocates sitting in a trade until target or initial stops are tagged. It just doesn’t make sense to me as a ´scalper´ but each to their own and I am not advocating one method is better than the other. It´s just how I do it which works for me.

From a model strategy pov we had a loss of -13 as S1 didn’t hold.

Macro Update

On the macro front one interesting piece of information I picked up yesterday might have an effect in future on the eurusd. It seems that as part of the China US trade deal, China is to be restricted in buying FX to limit the appreciation of the yuan. In which case it may depress buying of the euro which if significant (and true) may open the gate to lower eurusd prices. I will try and dig into this further and keep you posted.

We also had a push on ATHs in the US equities space. Nasdaq posted new record highs. We also printed new yearly highs on the USDx.

For today there is little on the data slate other than German IFO data out at 10.00 CET.

The Daily Chart

As we look to be setting up for a test lower its helpful to take a look at a more compressed Daily chart to remind ourselves of what lower looks like. We have the void I have mentioned in the past with not much structure below the 1.1175s until we get to 1.10.

Once through 1.11 we have no structure at all on the Daily time frame. Also remember we have quite a bit of confluence at the 1.1175s with month and week levels and the 61.8 Fib of the major swing. If it takes  this level we could be in for a quick drop to the 1.10s. Apologies for the ´messy´looking chart but I need to compress the view se we can see whats happening.

The Hour Chart

Levels as per.

I have made the 1.1175s the S1 low zone for today but if you can I would actively manage this as a quick push to trigger stops below could take out our model stops in sharp order. We have some decent H1 structure to trigger scalp trades above the current 1.1214 price as I write. Watch for a test of the 1.1225s initially and the 1.1245s.

Again apologies for the compressed chart but we have to see where we are in relation to the bigger picture.

Have a good one amigos :).