Euro/Dollar

morning

As indicated at the beginning of the week EU has made a good clean 5 wave trend up from 1.266x to 1.312x and all the time it remains below the high my assumption is that it is correcting that move.

Taking the possible correction one stage at a time, I am looking at the last swing up from 1.288x - 1.312x first.
As you can see from my chart I have an initial target zone covering 3052 to 3024 and expect pullback towards 1.3100 from in that zone.
An overshoot would probably see a bounce off 1.300x.
You will note that it is possible that the turn has already started as the price has dipped into the zone already, but I think we will have more downside towards 41 & 32 first.

Once it completes a pull back without taking out 312x high then what is showing as the initial corrective move wA, wB will become the first part of the larger corrective move down and will be targeting 299x to 293x initially - better target info available after the pullback.

So I am trading shorts today but expect a pullback by 3024.

Currently still short from yesterday.

I'm going as to EURUSD to set an order for SELL:
If the price breaks through the level 1.30455 bearish movement will start. And it seems to me that targets of the bearish movement: 1.30005, 1.29395.

I am not inclined to have a position on going into ECB decision or more importantly Draghi's post decision press conference. There is just too much chance for surprise, especially during the speech, where some off the cuff remark can send price on a wild spike.

Although it is to early to confirm that the decline from 1.3126 is the end of any farther upward movement from 1.2880, it increasingly looks that way.

One definite risk that exists is a spike during Draghi's comments that will take out the 1.3126 high. A rate decision surprise is not anticipated by the market, and any surprise would be to the downside on a rate cut, leaving the 1.3126 high in place, and cement what looks to be the correction off the 1.3126 high.

Looking at the landscape of the market going into the presser then, I see an opportunity for a good Risk/Reward trade should a spike, or hopium rally during Draghi's comments take out the 1.3126 high.

There exits two Do Not Touch options in the market, one at 1.3150 and one at 1.3175. These are big boy plays, often central banks that make a multi-month bet that price will range between two levels, but not trade one tick at or above/below the option strike. If it does, the option expires worthless, and the seller keeps the premium.

A few things things characterize price action around these strikes.... a big player, like the central banks behind either side of these options will defend the price level to keep the option alive until maturity and payout. They will dump huge amounts of supply ahead of the price to hold off price making a touch.

However, during a fast money spike, they often know they will lose trying to hold back that momentum, and simply pull all the supply to get out of the way of a fast money move.... they have to accept the loss.

Of course who ever is on the other side of the trade is doing to opposite.... they are trying to push price just high enough to pick off the option, lock in their profit and then scram.

Today we have two DNT options close together in the market... one at 1.3150 and another at 1.3175. You can look at the daily and see why they are at those levels. The 1.3150 is the most vulnerable as it has less age and is somewhat less worth defending. The 1.3175 will get a lot more defense.

I am setting sell orders in front of the 1.3150 option, with a stop tucked above the 1.3175 option.

I'm guessing that the option sellers want to try to use today's ECB volatility to try to take out at least the 1.3150 strike. I am hoping that they either lose the battle, or at worst, lose the second battle that would then take place in front of 1.3175.

It is entirely possible that the high at 1.3126 is protected enough simply because it continues to mature each passing hour that we continue to put in corrective price action. But there are valid Elliott counts that can exist with it being taken out.... I posted about one if you care to find it in the thread. Maybe Draghi doesn't say anything to generate enough volatility to bring out an assault in 1.3150.

I will be just as happy if 1.3126 stays in place.... a good entry will present itself, barring a surprise rate cut, and I can get in if I wish after the risk event passes.

At the same time, I can set my orders ahead of the risk event to take advantage of any 1.3126 break, with a stop loss exposure that promises great Risk/Reward if I catch my fills.

Sell limits set layered back from 1.3120, low enough to catch half the fill should 1.3150 hold.... which I prefer....

Orders are engineered to create a 3% of account max risk, if all fill, or 2.35% max risk if only half fill ahead of 1.3150 holding, but always against 1.3180 stop.

Looking back over this past year, I decided to bump my risk per trade to 3%... some day I may have the nerve to bump to 5%... keeping risk per trade low makes climbing out from a loss faster and easier psychologically.

Orders will be canceled if no fast money move develops to get filled.... if we melt up to those levels I will have plenty of time to watch price action first, then act accordingly. I think melting up there is becoming increasingly less probable as time passes, but 1.3126 is not cemented in place yet...

Now back to bed, price alarms set....

Second day in a row... are Bond vigilantes trying to send Draghi a message?

Pretty pictures for Bears below...

Watch the top of the channel that caught the last swing low....

The steepness and speed of this correction are unusual for a wave 4. I think this wave A of correction...

but its look, feel, character and depth at this stage of development are not what I expected. This may also be a result of very light year end liquidity. A lot of people, including myself are reluctant to trade much these last few weeks of the year when conditions are deteriorating.

I am not inclined to have a position on before the usual NFP high volatility. We will see what develops, which can be distorted given the highly emotion driven extremes NFP releases often bring.

If 2880 breaks 2835/40 next level of interest.

Beware of a head fake break.... especially post NFP

I am long at 1.2893

I'm back out at 1.2893..... don't like that it could not hold above 1.2900.... Its Friday... it needed to move or I needed to bail.... don't want it over the week end....

Nice try.... may try again Monday when the week end isn't staring me in the face....

I have re-entered long at 1.2996... tight stop just below the emotional fake break of 2880.....

edit::: I mean 1.2896 of course...

looking at Oil the same way..........but it is friday (no emotional drawdowns for the weekend, please) so will pass for today

You're a wiser man than I...

don't know about that...did take your first call at 1.2895 and out for a few over 1.29...hard to not pull the trigger, but back to flat

not much reaction for CAC DAX FTSE off the poor Mfg and IP prints

AUDUSD is like playing wack-a-mole... I have entered twice and taken profit twice.... now its back up near the sell zone again.... Don't think I'll go back in on that one till the spike that will come from a break of 1.0520...

I soured on the position trade idea... the interest is too steep to hold for months.... but that one is going to parity... just gonna have to work it in pieces to avoid getting eaten alive by interest...

EURUSD back near post NFP highs at the same time &SPX has given back nearly all its post NFP gains... that a good sign for bulls..

Taking half profit here at 1.2935... I don't normally like doing this, but because I will hold the position over the weekend taking half off here allows me to keep the stop loss where it is, but still have a risk-less trade.

If you do that on a regular basis, you set yourself up for failure because you take 100% of teh loss when it loses, but only partial gains when the trade runs....

But in this situation...

you mean the situation re Boehner about to speak?......just referred to as Debbie Downer and slated for the top of the hour

gotta love it

I have set an order to take another 25% off at 1.2970...