EUR to Drop 3000 Pips this Month: Why, how?
FACTS ABOUT EUR:
EUR is the must liquid currency.
It is used by 17 Europe-member countries.
It is the most traded currency.
It is the most predictable currency.
It is quoted with a very low spread by most Forex brokers (especially when quoted with USD).
It is the first choice of any good scalper, or EA coder, etc.
EUR CRISIS: 'A BLESSING FOR TRADERS'.
I was taught, as beginners in this business, to go for the green pips (profits) irrespective of the currency direction. The basic guide is to avoid a fight with the MAJOR TREND.
Forget all the rhetoric from the Eur councils: doubling, or tripling the bailout funds, etc.
The fact remains that EUR is like a sick baby on a LIFE-AID machine! Any time their major donors decide to withhold their credit line, the single currency will be in a big disaster. Let me hold it there for now.
Just as a 'Forex guru' will never run out of new indicators/Alert for sale to novice traders who refuse to learn, so shall a good Forex trader continue to blessed and multiply his profits as long as the crisis lingers!
WHY? RISK AVERSION: EUR vs. SAFE -HAVEN CURRENCIES (EUR/USD; EUR/JPY)
When I say risk aversion in Forex trading, I simply
means traders avoid buying high yield, risky currencies(GBP, AUD,
NZD ,etc,.) and are buying low return, low volatile currencies like USD and
JPY known as 'safe -haven
currencies'. Also, since we are in a risk aversion trading circle which was prompted by low CPI, interest rate cut, etc, by the central banks of these high yield currencies, traders have no option but to buy the safe haven currencies.
Because of the prolonged economic crisis in European countries which negatively affect EUR, 'BIG' Forex traders ARE HEAVILY SHORT on EUR in the month of May. Again, since EUR is weak, traders pair it against safe-haven currencies which are strong: USD and JPY. Hence, we have EUR/USD and EUR/JPY.
From my personal observation, as a fundamental and technical trader who also has a good insight in EUR seasonal behavioral pattern, I come to the conclusion that the month of May is always a bad month for EUR since the advent of European crisis in 2010: Scan through your past monthly charts for confirmation.
HOW TO GRAB THOSE PIPS? Technical Analysis:
If EURO strengthens for any news spike: ECB sounds hawkish, or if there are any strong positive surprises out of Greece (election), be calm. At the end of the rally, SELL the two EUR pairs.
Hence, 'sell the rallies in a down trend'. Since you are now aware we are in a down trend for this month (MAY).
On the other hand if the risk aversion currencies I mentioned (USD or JPY) is weighed down by strong negative news, do not panic. At the end of the weakness, BUY the currencies again and SELL EUR, their base currency.
For instance, the NFP number was USD negative on the 4th of MAY, 2012. EUR/USD sparks up. At the end of the rally, the down continued!
It may interest you to take a quick look at the monthly and weekly charts of the two pairs: EUR/USD and EUR/JPY. Post your comment here on what you observe!
EUR/USD looks helpless like the American DRONE that lost its locus on a spy mission at Iran/Afghanistan border and was captured by the Iranian military in December 2011.
EUR/JPY looks like the North Korean rocket as it was about to crash into South Korean’s sea on 12th April, 2012 after its lunch.
ENTRY POINTS: SELL
For any EUR up -trust, or rally, look out for resistance points where reversal candle pattern like Inverted Hammer, Evening Star, Tweezers, and/ or Doji forms. Use a simple oscillator like stochastic with the broker setting on M15 time frame. SELL at or above 80 (over bought level)
Add to your position at any resistance level each day. Take some profits and allow the rest to run!Remember not to trade more than 2% of your equity for each contract.
I await your comment on this article each day as you make you pips.