EURUSD I believe moves more on dollar revaluation .Wow! What crazy short term market moves!!
That right on a day like today where the EU zone reported weaker economic numbers but seemingly the EUR held up in value until news / rumors / or presidential Tweet on social media, announced that the China trade war was relaxing just a bit. Pushing tariffs out which gave the impression of relaxing the hard line trade war stance and a heightened possibility for a trade war resolution...
And Poof! EUR weakens USD strengthens, and a lot of newer traders are asking themselves seeing the sudden moves “Now what?”
Understand what is most likely to happen if and when this trade war really ends. Today’s moves were nothing...
First let me say I don’t have all the answers. I’ve made most if not all the kind of mistakes you have made. I lost some money today on the EURGBP trade idea I posted, but also was on the right side of a win-fall calling the GBPCAD move right. What I’m saying is just my personal opinion, my thoughts, and observations, and how the EURUSD has moved this summertime period.
And it is my belief that the EURUSD should it be on the side of strengthening and moving up—that a move like that is mostly due to government dollar revaluation, and not due to economic outlooks.
On my daily chart you can see the EURUSD has been over all, in the long term grinding lower. Recently Trump tweeted how he wanted lower rates / lower dollar valuations, and Poof! EURUSD created a false breakdown—jumping into the 1.1200’s and there began stalling.
Economically what really changed in either economy? Both the US and the EUR zone were starting to show signs of a global slowdown.
What I’m seeing is the markets have carved out a channel showing the extremes of valuations within these times of nations attempting to use politics to manipulate currency values and keep economies going despite politically overspending.
So what does this have to do with trying to trade the EURUSD?
As traders we value trades as to where are the highest probabilities of a move happening. Up or down being in the center of a daily channel I’d say there is a 50% chance of it going up and a 50% chance of going down. No real trade probabilities. Of coarse as I explained already political Tweets can move markets. So as the EURUSD moves down towards the lower channel trend-line the odds of a bounce goes up. Why? Because president Trump needs a weaker dollar in an attempt to get a more favorable out come with the China trade disputes. And as the EURUSD goes down towards the lower trend-line, the probabilities of crazy tweets increases, and the current market outlook for the Fed cutting rates in the US more—should push the pair higher.
On the top end though what conditions could take place pushing the EURUSD towards 1.1350ish ?Certainly not in terms of true economic comparisons between the 2 economies should the EURUSD sustain that kind of valuations. Only a successful political policy of the USA government to weaken the dollar could in my view. But then who am I?
Being in the middle of the range and having a higher news risk to trading this pair, makes this one a bit more risky to trade for new traders.
If you are looking to trade it...
trade lighter and with smaller size.
Use tighter stops ( thus risking less),
shorten profits target zones ( don’t have unrealistic dreams of a favorable bigger move, yet be aware of a large unfavorable move that can happen with just a Tweet. )
Those should be the lessons of today’s market moves.
Good luck to all your trades.
In markets like today, you either make dust or you eat dust.
All the best.
