On Friday's CNBC "Money in Motion" show, I gave these guidelines for a short euro-dollar position:
EURUSD trade: Big Channel Love
Bottom 1.3150, Top 1.3950 and we're in the middle.
Risk for next week is more "jawboning" and whining by European officials on the currency as we get EZ Fin Min meeting (Feb 11-12) and G20 meeting (Feb 14-15)
Play the range in the middle of the channel:
Sell a rally:
1.3475 entry, S/L 1.3525, T/P 1.3325
The entry point at 1.3475 triggered on Tuesday and we got close to the S/L 1.3525 on the same day. I got lucky that that high was only 1.3520. As you can see, my concept was that we would see more comments from European Union officials that the strong euro was a bad thing. I didn't anticipated that yesterday an anonymous European Central Bank official would say that the strong euro was a bad thing for the periphery countries. What also helped this position is that the GDP for the euro zone came out weaker than expected at -0.6%, which is the worst performance since Q1 2009.
Subsequently, the euro-dollar pair has traded to our profit level at 1.3325. For those that want to stay in this trade, you have some choices.
- You can cut the position in half and move the S/L to 1.3400 (guarantees some profit and provides for potential additional profit).
- You can ride the position, but move the S/L to your entry point at 1.3475 (no guarantee on profit, trade becomes a zero loss trade with only profit potential).
Yesterday, I recommended selling the euro against the dollar again at 1.3500. However by the time I got on air, we missed the entry point. I hope some of you got short anyway. The target on that trade was 1.3350.
Again, the concept was that EU officials would squawk and talk their way to a lower euro ahead of the G-20 meeting. So far, they haven't disappointed.