Trading Forex – EUR/USD Before NFP

Posted on 08. Jul, 2011 by in Forex Signals, How To, Random Noise

Trading Forex is all about planning your trade and trading your plan. Yesterday’s plan did not play out as expected unfortunately. We took a loss and stayed out the rest of the day. Today there should be a good chance to catch a pre-NFP trade. Read the details below.

We did have a setup yesterday which did not work out, unfortunately. That was the only trade I took the entire day, as we were waiting for news from ECB. They did hike rates as expected and further hikes are anticipated. EUR/USD did rally all the way up to the 1.4370 level, which is where the pair currently trades.

Along with the rate hike, we did have warnings from S&P and Moody´s in the past couple of days as mentioned in this post Trading Forex – EUR/USD Ahead of ECB Announcement. In addition to this ADP came out yesterday at 157K which was more than double the expectations. Finally we have NFP coming out today, with expectations of a better than previous release, which is supported by the ADP figure. Needless to say that I am a bit ambivalent with the entire situation due to conflicting fundamental aspects. However, I do have some fairly specific ideas. Keep reading.

Trading Forex – Bias

After a rate hike yesterday and a fairly light move to the upside, I am close to neutral at this moment, mostly due to the state of the Euro and less so for the Dollar. With the NFP expectation and the actual ADP figure, I think we will see dollar strength today, in the hours up to the NFP release. However, keep in mind that the hours before NFP tends to be thin on liquidity. A couple of hours ago we did have a break of the lower range on EUR/USD and right now it is trading closer to the higher end of the range. I think looking for a trade on USD/CHF or USD/JPY and look for possibilities to long the dollar might be a good bet as well, as well as a possible short on EUR/USD. I have a small bit of bias on EUR/USD to the downside, mainly because the move after the rate hike was somewhat limited (relative to previous releases) along with the ADP figure and expectations for NFP. I am currently in on a short trade on EUR/USD and long on USD/CHF. See the details on my facebook page.

Current state of USD/CHF also gives us an indication of possible further downside on EUR/USD. However, due to the mentioned aspects related to the EUR, the inverse correlation between the two pairs might not be a good as it tends to be.

Trading Forex – Technical Perspective

There is not a whole lot to be said here. Everything runs heavily on fundamentals right now and technical analysis tends to less follow-through. Because of this, pin-pointing perfect entry levels are close to impossible and obviously going in with a larger stop loss hence a smaller position size will be necessary.

Trading Forex – Ideas

With the above mentioned aspects in mind, I am mainly looking for possibilities to go long on Dollar.

EUR/USD is difficult. A rate hike is obviously good for further upside on EUR/USD. However with the warnings from S&P and Moody´s along with some possible pre-sentiment buying into dollar, I think we are looking at possible downside in the hours coming closer to EUR/USD. I am already short, but anywhere close to the 1.4350 level should be a decent bet. Make sure to keep a larger stop than what you normally use. Alternatively or additionally, a long on USD/CHF or USD/JPY could be a good bet as well. I am already long on USD/CHF, so if you want to get in on that on, waiting for a bit of a pullback would probably be a good idea, and the same goes for USD/JPY. Remember to have larger stops than usually (read; 50 – 100 pips), hence decrease your position size so you don’t risk more just because you use a larger stop. Moving SL to BE around 50 pips of profit would be a good idea. If this would be the case, I would prefer to move my stop loss to break even and keep it open over NFP as if we get a better than expected release, this could be some really good trades. Best of luck to everyone and remember to keep risk low. Things can be very volatile on a day like this!

Trading Forex – Money Management

Trading Forex is not a get-rich-quick scam. It takes time to become a profitable forex trader, but the main hurdle for traders tends to be a lack of money management. Keep you risk below 5% on any given trade at all times and preferably around 1-2%. Always place a hard stop and never move if further away, once placed. This way you will be able to stay in the game and make more rational decisions. Trading Forex in a profitable way is highly dependent on money management and the ability to control the psychological aspect related to trading forex.

Related posts:

  1. Trading Forex – Cable Below Key Level
  2. Trading Forex – EUR/USD Up or Down?
  3. Trading Forex – AUD/USD Further downside
  4. Trading Forex – EUR/USD Fighting with 1.4500
  5. Trading Forex – EUR/USD Down to 1.3700

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