I've been trading for years and I can tell you yesterday was a unique day. The pair rallied nearly 350 pips from low to high - the average is right around 130 pips per day. The last time a move like this happened was September 16, 2008 - it's not the sort of thing you plan your strategy around. I did have a short position at 2450 that I got stopped out for 65 pips rather quickly - but that is what stop-losses are for. So I always know the maximum of what I can lose. Nearly every different media outlet reported a different reason for the melt-up of the EURUSD. Some reported bad jobs data, others reported ECB liquidity... the list goes. In reality it was most likely a combination of a whole bunch of factors and, truthfully, it appears that a few big hedge funds probably got liquidated which accelerated the gains.
Perhaps ZeroHedge said it best with their post What the hell just happened there? - ??Forget stocks, gold, and oil. The story of the day was the EURUSD, and the various trading desks that blew up are a result of the 2.4% move in the pair... What the hell happened there? The confluence of the LTRO termination, today's MRO, end of quarter, the official descent into a double dip for the US, and who knows what else, apparently ended up blowing up one or more players.
Daily Outlook: Given the confluence of fundamentals that caused the massive rise those things are hard to predict. It's why we use stop-losses to protect ourselves. There is one warning sign I wish I would have heeded though, to be honest. Take a look at the daily charts, specifically at the bearish channel I pointed out yesterday. Looks a little different on the daily charts doesn't it? In fact, it looks like a bullish consolidation pattern called a pennant. Is that a 100% signal? Of course not. Nothing is forex is. TIF - this is forex. But it was a warning sign. Would my analysis have been any different if I had noticed it? Honestly, probably not. I would have still been extremely bearish. Take a look at that daily chart - the trend is down.
But I might have been a bit more cautious in my analysis. There are a lot of beginners that read PipHut and this is a stark reminder to always use stop-losses, use good money management, and to always use PipHut in conjunction with your own analysis. I took a loss yesterday, but it was just a minor ding in my equity thanks to my stop loss and solid use of leverage. In short - I pride myself on getting it right, but I fear that I missed that one yesterday :/.
Trading Idea: It's Friday (I normally don't trade on Fridays) and after the theatrics of Thursday I'm glad to sit this one out. If I was trading I'd be looking for short-term bullish setups. Specifically a long at 1.2350 (pullback to former channel resistance) offers a long setup to 1.2450 for 100 pips profit. A more aggressive trade would be a long on a sustained break of 1.2560 (a flag pattern appears to be forming under this level on the 4h charts) with targets to 1.2585 and 1.2610 and 1.2640 for 90 pips.
Have a great weekend.