The EURUSD continued lower today as the USD strength continued. The USDX sustained move higher above current support at 98.00 is bullish as we go into the weekend.
The question today was whether or not the EURUSD would test the 1.1000 figure. As it moved lower beneath its Asian session low, a short was taken risking 8 pips for a potential 37 pips to our daily target at 1.1003. As the candles developed long lower wicks, as buyers entered, we locked in profit and our profit stop closed the initial trade. It’s very common to see a retracement in advance of the U.S. open.
As the U.S. session got underway, we went short again risking 8 pips for a potential 26 pips to our daily target. The trade was closed at the U.K. close for an overall modest return.
The current move higher for the USD and U.S. 10 year yields is attributable to the optimism regarding the U.S. – China trade talks phase one being signed… and both sides making concessions in the meantime. If either side scuttles the agreement, we will see an abrupt reverse in the current “risk on” sentiment.
In the meantime, the USDJPY is trading with a very high correlation to risk on sentiment as measured by the moves of the S&P index…and this correlation also extends to JPY crosses. Understanding correlations is a very powerful tool for any trader.
Enjoy your weekend and good luck with your trading!
