I hesitated a lot, and checked every angle before I went short the EURUSD, and it has moved even more aggressively down than I expected. Experienced traders would have seen the pattern sooner. I was pretty sure that the Euro will turn down, especially as it reached critical resistance near 1.3320 at about the same time that the Italian election results were scheduled to start coming in. It all looked so well manipulated. If the overall picture plays out as history says it likely will, then we should see 1.30 in the near future.
Some of you might have noted that I did not close the AUDUSD short even as it went past my SL level at 1.0310. The reason was the same – the move, early on a Monday, was surely going to be reversed. That has also proved correct.
Another observation is that I did not short the EURJPY. This is because the USDJPY is rising and the EURUSD is falling, so the EJ gets stuck in limbo. It may move a bit in either direction, but not to the same extent as the component pairs will. When EURUSD has stopped dropping, that will be the time to go long EURJPY, assuming USDJPY is still in a bullish trend.
Bernanke speaks to Congress on Wednesday, and whenever he opens his mouth the dollar weakens. So I’ll probably take profit on the EURUSD short before he starts talking!
Edit 16.30 hrs:
I had not read any news on the Italian elections until now. I was just analysing the chart action! Now I’m reading that Berlusconi and Grillo seem to have got more votes (so far) than earlier projections hence the dump in EURUSD.