Here's a review of my EURUSD longs
I thought I'd assess the current scene in the euro regarding my longs
You should regularly assess your trading positions, no matter what time scale they are on. When I take longer-term trades, I have certain assessment points for when the position is going against me. For example, 1.0300 is one level that if broken, will cause me to take a long hard look at what's going on to see if something has materially changed that will affect my strategy. The next point after that will be 1.000.
If something has vastly changed then I need to decide whether my whole strategy is blown or whether I just need to cut some of my risk by scaling some of the position back, and then ride it out.
In this instance, I currently have the luxury of looking at the upside to assess what the price needs to do to help my position along. It's as vitally important to assess the levels when the price is going in your favour as it is when it's going against you. Far too often I read traders who will identify a level to trade at but completely ignore similar levels that stand in their way towards their profit target. The exercise should be the same whichever way the price is going.
For my positions at the moment (long from 1.0650 down to 1.0355), simply, I'm more happy now that the price is above the 1.0500, which as you know I see as a pivotal level for the overall direction. In no way am I jumping for joy and clicking my heels that I'm in profit and the worst is over, this is purely just a look at the chart now the price is looking more solid than it was a week or so ago.
What am I looking for now?
For now, the momentum is going my way so I can have a look at the chart and see what my next obstacles are.
EURUSD H4 chart
Initially, yesterday's high up around 1.0680 has been a level of resistance previously. The 1.0680/90 area has been staunch protection of 1.0700. That level itself has (to 1.0710) has been another S&R point. Break there and technically we have some empty space to the 38.2 fib of the Brexit vote high at 1.0755. There's more clear sky up to 1.0800.
The 1.0800 & 1.0830 are levels I remember very well through 2015/16. They were very strong levels multiple times on the way down, and I need to see whether they are again on the way up, if we get that high. This is going to be where I have a real assessment of my trades on the upside, as a failure to break there could mean a steep pullback. It's at this point I may decide to take partial profit on some of my higher priced positions, with a view to scaling them back in on a failure dip. Trading that way means you can take some profit along the way, and use the subsequent price action to reload and/or increase the position further. I would also look to add to the position on a confirmed break of 1.0800/30, meaning I'm still building on the way up, not on the way down. If we do get above the 1.0800/30 area, I'll have another fuller assessment to see what stands in my way next.
That's a brief look at the price picture but what about the sentiment/fundamental picture?
I very nearly did a jump for joy when the Eurozone CPI beat expectations as that's one of the big reasons I'm in this trade. However, what kept me anchored was the core number. That's the one I want to see moving higher. If we're moving up just on the energy price then I expect to see that filtering into the core at some point. There is always a lag between those "second round effects" as the ECB constantly point out but if there's one thing we all know, firms are much quicker at putting prices up than they are cutting them. Case in point, UK fuel prices are now nearly at levels when oil was nearer $70 than what they were when the price of oil was falling down to the lows. Prices always go up quicker so I'm not expecting core inflation to lag as far behind as it did on the way down.
The Donald also helped my case by not delivering at his speech on Wednesday. It's obvious the market go way way ahead of itself on that one.
The Dollar is still performing exactly as I thought it might after the hike. These were my thoughts before the FOMC;
"The key to the trade is getting in early but only after certain conditions have been met. The ECB meeting was one, the next is the FOMC. These are/will be two big defining events and one's that I feel could mark a significant bottom for the euro. Just as I can't see the ECB going deeper down the QE rabbit hole, I can't see the Fed giving us a hawkish hike. I'm going to use these two meeting to set me up as I don't see much more downside once they're over. Initially I'm looking for a similar reaction in USD to the hike last year but not as big."
With USDJPY breaking below the 115.00-114.75 area, and now seemingly struggling to get and stay back above, that's confirming my view above, and that makes me feel more confident in my strategy. However, as we all know, that could change in an instant so there's not chicken counting going on round my way.
I'm not even remotely close to doing any form of victory lap as there's a long way to go yet. It's always a better feeling when things are going the right way but we must always be prepared to deal with the situation when it changes goes against you. So I'll continue watching and assessing, making changes where needed and letting the price action be my guide. No matter what I want the trade to do, the price will decide that for me.