When trading you must constantly be searching for the indicator(s) which leads price movement in the markets you are trading. These indicators come and go i.e correlated weakness/ Strength in differing Indexes , and it is your job to identify them swiftly.
The storm clouds continued to hover over the Euro currency with continued peripheral debt concerns on Wednesday 15th Dec . We had Spain and Portugal concerns in the early morning session across the news wires – with pressure internally from the ECB and from the market to get their finances in order with policy makers confirming the need for a permanent European Stability Mechanism .
So what happened with Euro price action that day ?
We actually seen euro shrug of the news – and both Euro and gbp/usd Began forming basing pattern on the lower times (5min) before Euro began popping to new higher highs ( 5mins ) . The rally was short lived though with euro retracing back into a 61.8% area before price was mark down aggressively with a drop of more than 170 pips in quick succession . Now the interesting thing to note is that gbp/usd Basically sat there in fact it began selling off a little – It refused to break to new highs with its little brother .
Fast forward to Friday 17th Dec and you have yourself a Case of deja vu –
Early morning News / Fundamentals wise we had Moody,s Downgrade Ireland debt to Baa1 from Aa2 – and Further rhetoric on Spanish Banks hit the Wires .
Euro,s Price Reaction ?
Basically we seen the exact same price action play out on Euro breaking higher retracing on Friday into the 50% Fib Retracement/reversal level while Cable was glued to its tight range .
Here,s what I tweeted that same day to Euro Traders
Then less than 1 hour later we had then exact scenario play out and by End of day Euro had Collapsed 220 pips of its 50 back –
- Same scenario @ Play #Eur/usd shrugs off Bad news pops to 50 back then sells off Same old story > http://bit.ly/hVMxNV11:51 AM Dec 17th via Echofon
As I wrote in my open – rejection – reversal. “News Event Driven plays” “When reacting to news Often the market will move in a contrarian direction until such time as the herd begins to dismiss the validity of the original data and begins to reverse both their opinion and trades. Only once these “weaker” participants are out of their initial positions does the market subsequently resume its correct, fundamentally-driven direction. As a result, such price movements on the back of fundamental news are fading opportunities and that,s exactly what we got – Once again . “
“Fundamental news driven Price Reaction” The baldy one has spoken – Copyright © 2010 tweeterTrades