I try to avoid posting trades that involve USD. Reason is very simple. Everybody and their mothers seem to have an opinion about Forex trading this days, and, inevitably, that is confined to dollar based pairs. It all creates information overdose, since there so many opinions floating around. For the most part I’d rather focus on the broad world of currencies trading outside of the US dollar. Nonetheless, I did receive a fair number of questions about EUR-USD, so I’m going to take a look at it.

This chart covers recent few months worth of daily data for this pair. As we can see price dropped about 4000 pips very fast. This is “fast” in relation to how long it took for the price to climb to 1.6000 level. This move down was very directional, with very little in terms of bounces and congestion areas. This presents a dilemma of sorts- sell off already met or exceeded possible down targets using most common technical analysis.  Over last couple of weeks price created a trading range of about 1000 pips, between 1.3270 and 1.2260 or so. I would expect it to be contained within this range for some time now (few weeks), with down side bias. Bias exists because we are in a bear market and until we have a clear reversal, this takes precedence. Should the price break outside of this range, next target would be 1.1500 area.  On the upside there will not be much room, as the 100 SMA will keep moving down and is going to act as a ceiling, at least the first time it is probed. On fundamental side neither one of these currencies has much to offer at the moment. Their lamentable, but since US appears to be taking most proactive stance during current turmoil, chances are that USD will be getting a little stronger. Kind of like choosing the lesser of two evils. So here it is, my view on EUR-USD. Admittedly not very interesting, but I really don’t see any great trading opportunities here. Day trading should remain interesting though, because daily ranges are still high and will probably remain so for now.
Yesterday I posted an article about trading weekend gaps. I just wrote it few days ago, but it was already published on few websites. I will take a couple of trades today as I see some gaps developing before the open. To demonstrate it GBP-CAD will be used.

This pair closed Friday at about 1.8600 and early quotes so far indicate an opening around 100 pips lower. This will probably change a little bit by the time this is posted. I will be looking for a buy signal using reversal formations on small time frames like 5M and then I’ll try to sell it if the upper ranges of the gap are filled. I can’t really talk about exact numbers, because it will depend on the open itself, which is still 90M away, but article describes the principles. I’ll post results tomorrow.

Mike K.