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in Paul's Musings - 30 May, 2012
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How to trade EURUSD right now.

Here is the EURUSD daily chart.



Now what is totally obvious is that it’s in a prolonged downtrend. There is no doubt what is causing this , it is the fundemental effect of all the euro bad news firstly with Greece and now Spain and the fact that the situation is far more complicated than it seemed.

In my opinion there is more bad news coming up which is going to drive us down further.

So here are the ways of trading this .

1. Try and be a hero and predict a bottom to go long .

This can work well when the price action is in less of a constant downtrend like it is now, the problem with picking a bottom here is going to be your stop placement . It’s going to have to be pretty large and if the price does reach it the temptation to move it is going to be a hard one to resist.

2. Assess the trend and sell it on a rally back up to a good resistance level.

This gives us an easier trade to take and the possible opportunity to run the trade with less risk.

3. Try and jump into the downward action…

Chasing trends like this can be as bad as trying to pick the bottom. Only good thing doing this is it can be easier to pick a stop level.

4. Leave this pair alone.

Coming up this Thursday we have US unemployment claims data , US GDP data and the Chigaco PMI. We also have an all day event of the Irish Stability Treaty Vote which is where Ireland will vote on a referendum to accept or reject the European Union’s Stability Treaty. On Friday we have the Non Farm Payroll data and we all know how unpredictable that one can be .

Remember you dont have to be in constantly in a trade .

Trade Safely!