The euro-dollar trade is becoming fairly boring and that is a good thing for swing traders, as yet another summer trading day has key economic data continue to support the strong dollar movement. The euro’s decline towards the psychological 1.30 level may not be occurring as fast as some would like it to be, but the downward bias is firmly in place.
Today’s economic data from the U.S. gave the dollar a strong boost as ISM Services PMI came in at 58.7, its highest level since December 2005 and blew away the forecast of 56.6. The other key statistic of the morning was June factory orders, this reading highlighted an expansion of 1.1% and continues to support the optimism regarding the U.S. economy. The dollar hit fresh highs after both of these 10:00 AM EST releases.
Patience will be key for many euro short traders. Technical bounces may occur as we get closer towards the key pivot level of 1.3250. Immediate support however may come from the 1.3320 level, which is the 161.8% Fibonacci expansion level of last week’s low(1.3366) to high (1.3444) move.
Today’s trade is yet another euro short. If you are already short from last week’s setup, you may move your stop down to secure some profit. The current structure still supports further downside, and I still see 1.2900 possibly being important support. It is still likely we will have to wait till the ECB acts in September or October before we see one last major collapse towards 1.2500.
The trade: Sell EURUSD at 1.3380 with a stop loss at 1.3420 and a take profit at 1.3320. The Risk/Reward Ratio is 1: 1.5
Edward J. Moya
WorldWideMarkets Online Trading