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Recent Q&A about the EUR/USD

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Apr 26, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    I just thought I'd post a question I got via email from Lee Barker and the answer I sent back since it encapsulates my view on the EUR/USD right now:

    My response:

    I was in the camp it would retrace to 1.3800 before starting another major slide, but now I'm on the fence about it. There are periods where the Euro will trends and frustratingly refuses to retrace substantially. I knew the start of the selloff in Nov/Dec was part of something big, but I got caught waiting for the retracement that never really came to get in. I finally got in short aggressively on the pullback in January at 1.4572 with a final target of 1.3000-1.3300. I also called the bottom more recently in mid March ahead of those lows at 1.3250-1.3300 saying that was the spot to buy and said it would make it above 1.3500 and quite possibly to 1.3800 before resuming lower. That's all proven pretty accurate... so right now it's kind of 50-50 whether we push higher soon to 1.3800-1.3900 or if the retracement we've already had is enough for it to start another more major move lower. This coming week's price action will help tilt the odds significantly one way or another.

    Obviously we should be heading much lower over the coming months and 1-2 years, but it's not like we can just short EUR/USD with no regard for risk or SL in case we're wrong. My goal is to try to pick a somewhat precise top on a retracement higher and enter short from there. If/when I mistime that and don't get in, or get stopped out... I may try again but in the meantime if the trend does re-establish, I'll look to take smaller chunks of it here and there with trend following trades. If I am able to get in a longer term trade at an ideal spot as I did in January, it allows me to focus more on the medium to long term targets where the move will run out of steam for awhile. Anyways, right now in the 1.3000-1.3300 area, we're in one of those regions that this move down from 1.5100 was very likely to run out of steam for awhile and maybe bounce some. Until it either very decidedly thwarts that and rockets lower with some degree of confirmation, or pushes higher enough to entice a pullback sell for the long term... I'm waiting for the right time to get back in.

    If we are going to turn higher as a wave C of a flat to finish off this wave 2 retracement, the target area for it to rally to is 1.3800-1.3900 roughly. If we did already top out the retracement there in the 1.3600's, chances are this wave 3 major move down will target at least 1.1800 and probably more like 1.1200 over the course of several months, but it will likely be a steep selloff.
     

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