In Price Action Trading Strategy

A few things worth nothing today:

As is typically the case ahead of any release expected to reign in volatility, EUR/USD hit the breaks at a major technical level (spike base). I was in the trading room shortly after the nonfarm release on Friday, discussing how USD/JPY stalled at the 3/4 pull zone (76-78% retracement) right before the release. Failure to make higher highs / lower lows is common ahead of these because simply stated: who the hell wants to be buying into something seconds before a high-risk event?

Expectations and rumors were flying extraordinarily high ahead of today's auction, and we saw a good old fashioned example of “buy the rumor, sell the news” get triggered. Overall, it was successful, though not quite living up to the insane expectations of the rumors that preceded this:

Portuguese Oct’14 auction sells EUR 650mln, 3.6% bid/cover 2.6 vs. Prev. 2.8 (yield 5.396% vs. Prev. 4.041%)
Portuguese Jun’20 auction sells EUR 599mln, 4.8%, bid/cover 3.2 vs. Prev. 2.1 (yield 6.716% vs. Prev. 6.806%)

Add to actual auction expectations was confirmed rhetoric from the EU discussing further bond purchasing / added aid for Portugal — it's one factor that has been stabilizing the currency on a short term basis. 15 min local technicals are below — just the basics — spike base is at 1.3035. Keep referencing these on your charts; subsequent price action can also be determined simply by using these and diagonal trendlines as a reference:

5/5 (1)

ParaCurve is free and has been since 2008. Help us out and rate our content!

Showing 2 comments
  • mids99
    Reply

    It was also a nice retest of the daily trendline which tied in with the spike base level that you've drawn.
    http://farm6.static.flickr.com/5166/5348406465_5f

    Not sure how to use these moments as, like you say, far too risky to trade during the immediate run-up to the results. Is it just a 'theoretical observation' rather than an opportunity ?

  • nobrainertrades
    Reply

    Hey mids, There was and good spot. To answer your question, it's more in terms of recognition / awareness. The reason I write many of these articles in this way is to simply highlight points I've come across in the past with struggling traders, or those who "think" they're doing just fine but in fact have some holes that could use filling. Having written to the public for several years now my interactions with traders just keeps growing with numbers so the writing is geared towards getting others to simply recognize these things above anything else. I have seen more than a few chase price into these key levels, try to play the trend right ahead of a major release, underestimating the impact of these types of releases, what the typical reaction is surrounding expectation/realization, etc.

    Many retail sites don't even have this bond auction listed as a major event today, if that says anything. Talk about watering down the market. I appreciate the questioning of intent with this though; it's next on the FAQ area :).

Leave a Reply

Start typing and press Enter to search

Ireland CDS