Pick of the Day: EUR/USD

Gonna keep it easy tonight with a short term play on EUR/USD. The pair has been marching higher after hitting a low around 1.3450, and now approaching the possible resistance area marked on the chart. This area may be watched by traders as a possible selling point, and with the pair in a longer term downtrend I like the probability of success on a short play.

Before I go into my plan, let's take a quick look at the fundies.

Of course, the event of the week so far has been the coordinated interest rate cut from five central banks yesterday, including the Fed and the ECB. While it sparked off a bit of volatility and a short rally in risk appetites, this just gave traders an opportunity to sell the longer term sentiment that the Euro has further to fall and the perception of the US Dollar as a "safe haven" during this credit crisis and global recession. I think traders will continue to play on that idea as all that has been done so far is not a quick fix and that there is much more deleveraging and pain to go through for the markets.

So, risk averision is still in play and here's what I'm going to do if EUR/USD finds it's way to the potential resistance area:

Short EUR/USD at 1.3745, stop at 1.3830, pt1 at 1.3660, pt2 at 1.3475

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

We do have event risk with US unemployment claims being the major news of the day at 1230 GMT. Please be extra cautious around that time. Good luck and good trading!

00:19 09 October 2008 by Pipcrawler