Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
First of all, note that we extensively discussed the EURUSD situation in the weekly analysis and last week’s newsletter. I recommend taking a look at them before considering the trade idea below as the larger context of the current situation is explained there.
Sell EURUSD with targets to 1.18 and 1.15 ahead of the September 10 ECB meeting
EURUSD briefly popped above 1.20 yesterday only to be harshly rejected. The price continued to fall for the rest of the session, and EURUSD ended the day closer to 1.19 than to 1.20. This is the bearish signal we needed on the daily timeframe.
There were 3 main reasons for the EURUSD reversal yesterday:
- 1st was the big miss in Eurozone inflation, especially the core reading, which was at 0.4% versus consensus expectations of 0.9%. It is highly unlikely that the ECB can ignore these numbers at their meeting next week. They will have to do some form of further easing to fight deflation risks.
- 2nd was the US ISM manufacturing PMI, which was much stronger than expectations. In fact, the euro was rejected at 1.20 on this piece of news, although it was probably the least important one yesterday for why EURUSD reversed.
- 3rd was ECB’s chief economist Lane saying, we don’t have a specific exchange rate target, but EUR/USD is important”. This is the first sign of verbal intervention from the ECB in this cycle and shows that they are uncomfortable with EURUSD levels above 1.20. This is another strong sign that they will act at next week’s meeting to weaken the euro.
The price has already moved below 1.19 now, leaving us to find only short-term trades on the way to 1.18. Look to join around current levels (1.1870), or slightly higher if we get some correction here, and aim for the 1.18 area as an initial 1st target.
As said above, the probabilities now favor a break below 1.18, with the ECB meeting taking place next week. If 1.18 breaks, then 1.15 would be the probable area EURUSD will reach next. Thus, 1.15 can be used as the 2nd target of a longer duration on a short EURUSD trade.
Entry:
- Look for entries near current levels or higher on retracements;
- Alternatively, wait for a breakout below 1.18 to play a potential move to 1.15
Stop loss:
- At 1.20;
- EURUSD shouldn’t move above 1.1950 either for this trade to remain fully valid
Targets:
Trade signals from the past weeks
TOTAL: 0 pips in the past week
TOTAL: +2680 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
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