Those who got bullish at 1.18 for EUR/USD are having tough days. The rational for such bullishness is that they think EUR/USD is going to 1.20 or 1.25 quickly and since they missed the swift rise from 1.05 to 1.15, they don’t want to miss the next leg higher. One rule of thumb of trading is that when everybody is in the same boat then be cautious. When every bank is bullish on euro, it is time for at least a little retracement.
We are not saying that EUR/USD is not going to 1.20 or 1.25. It may even shoot above 1.20 tomorrow ! But as a trader, we don’t have any edge playing EUR/USD from long side at this level. Even if you are staunch believer in European recovery and higher euro and just want to ride out the pain of few hundred pips retracement for eventual big upside, price near 1.15 provides better entry in our opinion. Why? Because hope is the biggest enemy of traders. You will just keep on waiting hoping for it to bounce form 1.15 while being 200+ pips in red and market may never come up or plunges back to 1.05 ! Be flexible and trade what you see. Right now Euro weakness is evident so better to let it make up its mind and trade nimbly against proven support resistances for few pips a day before committing for big trade. Or one can trade it once it is above 1.19 in bullish manner once the consolidation between 1.17 and 1.19 is broken decisively. Don’t get caught at the edges and wait for the resolution for better trade.
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