Potential First Push In The Euro – Daily Forex Commentary 1/7/16
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EUR/USD Gives First Push?
I think you could make a case either way for today’s first push up on the EUR/USD. The only concern would be that half of the move was created by the news. If we were not heavily extended to the downside, and if we did not have the small stop run of the lows I would have probably continued trading with an open directional bias. Notice the 8:15 candle and the small stop run of the previous lows on the much better than expected jobs data. The market was showing a clear reluctance to push prices lower which the market has continued to agree with since. As always we still need to see a valid stop run of a lower manipulation point to take the long setup for a second push to the upside. That fail safe is critical, as it is our protection for when we get cycle wrong. As you can see I currently have only one lower manipulation point from which I would consider a stop run long from.
The GBP/USD decided to roll out some punishment today. I don’t remember the last time a pair produced 2 losing trades in one day but that is exactly what we had happen today. As I talked about in the members daily market preview video, this is a great illustration of the power behind high reward to risk day trading strategies. What do I mean by that? To start the week we had a nice full profit EUR/USD short and the combination of these three trades is break even. Obviously that is not the goal, but the point is high reward to risk forex trading strategies tend to resist draw downs more efficiently. This high reward to risk is a key to becoming a profitable forex trader without a doubt. It is also the key behind our +15.5% average monthly gain that I cover in the latest monthly trade analysis.
Unlike the Euro, the GBP/USD has shown no such upward bias and therefore I will continue to keep directional bias open. Like yesterday, I love the current lows as the first lower manipulation point from which I would take a stop run long. Why? Think about it from this perspective, if you were in a long right now where would your stop be located? If you were looking to short the Pound, what key level would you want to see break? As you can see the lower level is a focus point for traders on both sides and therefore likely to be a high liquidity point. Therefore any stop run of that level would provide a great high reward to risk day trade long. The upper levels are however, quite poor. When you get a gently sloping move to one side of the other you tend to have a mass of small staggered levels, with none that really stand out. As a result my first and only upper level goes all the way back to the highs from the 5th.
Forex News For January 7th 2016
We have no scheduled data that I would be concerned about trading into today.