Matt Simpson, CFTe, MSTA
CityIndex
The markets are likely to continue to range until FOMC minutes tomorrow, which may provide an opportunity on EURUSD leading up to the event.
Whilst the trend clearly remains bearish we are amid a correction, so I am seeking opportunities to hop on board. The overlapping nature of the candles as price drifts upwards provide the bias for a correction over a market bottom and we now trade in the upper half of the 1.235-1.260 range.
We have a strong resistance zone around the 1.2350 lows, so just above here makes a sensible [initial] target. If price does trade towards 1.60 before dropping then this does leave potential for a 2:1 reward/risk ratio by trading within the 1.235 - 1.260 channel.
As EURUSD has a tendency to whipsaw and spike around announcements, my preferred approach is to enter a sell-limit order below 1.260 resistance and a stop above the 61.8% retracement.
The advantage of a limit order in this scenario is that in the event of a gap against your position, any slippage which could occur may work to your favour if you do not get stopped out. If however you do get stopped out (and the market hasn't gapped past that as well) then you lose less on the trade than you would have originally calculated.
The downside of course is you may miss the trade all together.
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