Today we observed a fairly substantial
down day in the EURUSD above. This rejection coincided with the 38 fib
level retracement and previous support around the psychologically significant 1.32 level. However, it should be noted that this
still prints as an inside day on the candle chart and by no means represents a decisive
change in the recent bullish sentiment for risk assets & currencies. We have
observed strong buying of daily lows over the previous couple of
weeks and with this kind of upward momentum I am reluctant to get
back on the short-side of this Bear Market until we get some more
decisive bearish price action. It has been widely reported that there
is already an abundance of shorts in this market and any
surprise move to the upside could catch a lot of traders off-guard,
resulting in some panic driven rallies if this pull-back is sustained and
breaks the 1.32 region.
Before initiating any short positions,
therefore, I will be carefully watching the 4 hr chart tomorrow for
any indication of renewed selling pressure (eg.. false breaks to the
upside/ or strong rejection of highs) to give me an indication of
market sentiment around these key levels. Longer time horizon: I
still believe there is further downside potential and will be trading
with the Bear trend that is clearly still in play on the daily
timeframe.
Fundamentally; I do not see the Fed
Dovishness as anything new and the dollar has continued to rally
quite
happpily in the past when confronted with the spectre of Quantitative Easing and historically low rates. I think there is a valid argument for this recent rally being simply a pull-back and there is no reason why we can’t expect further negative News flow to come out of the Eurozone to induce fresh Shorts into the market. Accordingly I will continue to be keeping an eye on Portugese yields and specifically a close above the psychologically significant 7% yield on the 10yr. But as ever: it should be noted here that I am primarily a price-action trader and would need the market to show me a sign of it’s intentions before committing any money to the market. A confluent fundamental view can give one more resolve in running a winning trade a bit further; but ultimately I believe in "trading what you see" when it comes to bread-and-butter trading.
happpily in the past when confronted with the spectre of Quantitative Easing and historically low rates. I think there is a valid argument for this recent rally being simply a pull-back and there is no reason why we can’t expect further negative News flow to come out of the Eurozone to induce fresh Shorts into the market. Accordingly I will continue to be keeping an eye on Portugese yields and specifically a close above the psychologically significant 7% yield on the 10yr. But as ever: it should be noted here that I am primarily a price-action trader and would need the market to show me a sign of it’s intentions before committing any money to the market. A confluent fundamental view can give one more resolve in running a winning trade a bit further; but ultimately I believe in "trading what you see" when it comes to bread-and-butter trading.
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