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EURUSD NFP Trading Strategy
EURUSD has posted moderate gains in recent months, triggering numerous stops on its bullish climb across the FX board. We have been able to identify the potential for further gains but were unable to enter the market as no entry was available. On rare occasions we dismiss the charts and enter based on our fundamental outlook.
Today’s Euro Dollar selling in the Foreign Exchange (Forex) may have provided a comfortable entry to the market as we are classifying the bearish move as a dip before a resumption of the uptrend.
EURUSD Daily Chart
Please click on the to enlarge:
The main concern is the upcoming Non-Farm Payrolls (NFP). While an entry is available the price may press lower to test 1.1340 before reversing higher. A more pessimistic scenario would be a violation of 1.1340 and a test of the lower support (lower blue line), which would require a protective stop loss order that exceeds +200 pips, which we have no intention of exercising. It is not a weekly or monthly entry and EURUSD is not a volatile cross such as EURNZD and EURAUD.
Whether a bearish spike occurs as the result of Friday’s NFP or not it must be anticipated when we determine the location of the protective stop loss order. Euro Dollar is not one of the commodity currencies so the weekend economic data from China is not concerning us. As we are currently holding other trades in the market it will increase our USD market exposure ahead of the NFP. On the other side of the scale, this may very well be on the last potential entry to join the uptrend we have been anticipating for some time. As it greatly depends on the daily close we may issue the trade alert as we near 21:00 GMT.
EURUSD selling in today’s session were as a result of traders liquidating their long trades in the market ahead of the Non-Farm Payrolls rather than fresh traders shorting the European currency, which adds to our technical view that the current EURUSD weakness is temporary.
Aside the NFP the Eurogroup are due to convene on Monday, which could be the possible trigger for further gains in EURUSD. The key events for EURUSD is the Fed monetary policy, the UK referendum and the Spanish elections, all set for June 2016.
EURUSD Trade Alert Details
We are layering the protective stop beneath the latter support to reduce the possibility for another ‘USDCHF event’ due to the NFP.
Please click on the chart to enlarge:
EURUSD long at market price (1.1403)
Take profit: 1.1838
Protective stop: 1.1250
Risk Ratio (RR): 1 : 2.6 (approx.)
Estimated duration: 21 days
18/05/16 UPDATE: We have sent numerous updates on EURUSD via emails. Following the negative revisions that were made to the NFP and the actual figure that missed the market’s expectations Fed Dudley made several remarks during his stay in Switzerland. Fed Dudley stated it is reasonable to hike rates several times this year, which countered USD weakness following the NFP.
We closed 10% of the short trade while EURUSD was trading at 1.1311 as we were displeased with the progress of the trade.
The FOMC minutes (released on Wednesday) was more hawkish than expected, the Fed is signalling it is ready to hike rates in June, shoving EURUSD to fresh lows, triggering the protective stop loss order. We have re-adjusted the stop to 1.1240 prior to the FOMC minutes to ensure the trade will withstand a whipsaw reaction, which did not take place.
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Last Updated on May 19, 2016