A lot has happened during the last few days to a EUR/USD market. Since our last update, the currency pair went from being overbought at 1.5100 mark to retrace a good chunk of its yearly gains. It broke its long term trend line and support points of 1.4800, and today it did the same to its lower support at 1.4500 level. Currently it stands almost 200 pips lower, testing 14300 line.
As you can see, the market still can’t find the bottom. This is a good example of why trading stochastics on overbought/oversold signals can be so unsatisfactory. Just because they are oversold, it doesn’t mean they can not get even more oversold.
What’s happening here is that most likely we are being hit with wave of end of year profit taking. It is also getting very clear that the economy is going to pick up speed sooner or later, and the market is probably looking few months up front. Any uptick in economy will probably be followed with rate increase, yet this week Fed statement said very little concerning that matter.
Currently we are very oversold, and I would hate to sell it at these levels, just as much as I hated to buy it at over 1.5100 mark. That doesn’t mean that the market can not go lower – actually the market can go anywhere it wants to. That is exactly why you should be always protected with proper exit strategy.
My currently plan of trading is to look for some bounce, and only then evaluate situation for shortening the market. It’s very hard for me to accept that the market has shifted to bear ground when it was raging bull for so long. Fundamentals certainly have not changed so drastically, so most likely we are heading into some sew saw market…well, time will tell.
{ 0 comments }