Good morning traders.
Yesterday saw choppy action all through the London and New York morning sessions with limited movement overnight. The pair lacked any conviction and traded in a tight 30 pip range for most of the day. Consequently no levels were hit so nothing to report from a model strategy pov.
It might continue this way until next week when we have the ECB rate decision and press conference which may add some fresh impetus to direction. We know from Draghi´s latest comments that they are concerned about the downside risks facing the Eurozone and the final CPI data released yesterday will have done nothing to dispel that view with inflation running well below target.
However, the market loves ´match day´commentary so while he is likely to stay humming the same tune we may have to wait until then to rev up any action either way.
Until then (or unless anything else drops that sparks some life into the pair) we stick to the task at hand.
As an aside I would say for anyone new to trading that while trending markets are in the main ´less tricky´ to trade, ranging markets are what we get most of the time. Just got to get used to them although its fair to say that this particular range is out staying its welcome:)
The Daily chart
Nothing to add to comments I´ve already made this week.
As we have effectively failed at the upside of the range the downside could well be the next port of call. Considering the sluggish economy throughout the EU, I get a sense that the market is discounting any rate rises post the summer of this year which was Draghi´s initial forward guidance at the close of last year.
Perhaps we may even be starting to look at pricing in the ECB having to add fresh stimulus such as new LTROs (long term refinancing operations). It is fair to say that we look set for continuing monetary policy divergence between the US and Europe.
The Hourly Chart
Levels as per. For the first time since starting to write this dairy S & R remain the same for the third day in a row. If nothing else that´s a strong indication that we are in a pretty tight range with not much movement! 1.1425 to the upside is holding higher prices at the moment with 1.1370 ish providing support. Looking at the chart there is a suggestion that we could be forming a rounded bottom but its not a clear pattern just yet.
Not very exciting from our model strategy perspective but that´s just the way it is.
I know from experience at times like this it is very inviting to start to jump into trades which fall outside of your methodology or strategy out of boredom. I strongly advise you don´t do this. Discipline and patience are the foundation of success in this game. Do not be swayed. Wait for the market to come to you not the other way around.
Hold your nerve and as some guy from the late 16th century said, “…hold you courage to the sticking point and you´ll not fail…” or words to that effect.
Hopefully we will get some model action today but either way have a good day and don´t spoil your weekend by skiing off piste.
See you Monday.