How to trade the EURUSD given the key EURUSD events: German GDP, Greek IMF payment, US retail sales – our favorite simple short term news trade and how to play it

-There are a 3 potential short term EURUSD news trades today

-Why we prefer the Greek IMF repayment as the best simple short news trade for less experienced traders

-Basic strategy, fundamental and technical considerations for trade planning and execution

In yesterday’s article we focused on the EURUSD because it presented one of our favorite simple short term trade ideas suitable for less experienced traders – relatively easy to understand and execute.

We follow with another EURUSD post because today’s calendar presents another relatively straight-forward short term news trading opportunity. Feel free to use the strategy below for other EUR pairs, especially those with weak counter-currencies like the NZD or JPY).

News Trade Idea: Trading the Greek IMF Payment

The Greek €750 IMF Payment: The EUR hit Monday’s lows after the missed deadline for a "Greek reforms for EU cash" deal. Today the likely news trade opportunity is likely the news of this widely expected payment and short relief rally and/or reversal that follows. Simple trade strategies include:

1. Buy the EURUSD early today and with a sell target at one of our near term support levels noted below when either:

    a. Your chosen resistance level is hit.

    b. The EURUSD begins to reverse per your chosen indicators (for example, it dips below the 50 or 20    period EMA on the 4 hour chart below.

2. Sell the EURUSD when either:

    a. The current short term rally begins reversing per your chosen indicators.

    b. The pair hits your chosen resistance level from those presented below.

Our underlying assumption is that any relief rally will be short because the IMF repayment only buys Greece a few more weeks.

What Could Undermine This Trade?

• A strong beat or miss of the German preliminary GDP forecast could overwhelm the Greek repayment news, sending the EURUSD steadily higher or lower today. It’s out early (7:00 GMT) so check the result and EURUSD reaction to see if this is a possibility.
• A strong beat or miss of the US retail sales report. This report is likely to be less influential for the pair because:
  • -It happens later in the day (1:30 GMT) so there’s time for short term news traders to complete their trade
  • -The result is unlikely to influence market sentiment about when the first Fed rate cut will come, and thus unlikely to move the USD. Friday’s jobs report confirmed the consensus view that the rate increase will still come in late 2015. 

Technical Analysis & Outlook Next 24-48 Hours

Below are the relevant short term support, resistance and momentum indicators and some thoughts on how to use them to plan the details of the above trade ideas.

EURUSD CHARTS CLOCKWISE: 1 hour, 4 hour, daily, and weekly

KEY:10 PERIOD CANDLE EMA DARK BLUE, 20 PERIOD CANDLE EMA YELLOW, 50 PERIOD CANDLE EMA RED, 100 PERIOD CANDLE EMA LIGHT BLUE, 200 PERIOD CANDLE EMA VIOLET, DOUBLE BOLLINGER BANDS NORMAL 2 STANDARD DEVIATIONS GREEN, 1 STANDARD DEVIATION ORANGE.

See chart above for details and illustration of the following.

While support and resistance levels in the short term charts noted below have not changed, there have been some minor changes in short term momentum worth noting, as well as near term resistance on the 

• Key Near Term Support Per Daily Chart: 1.111, if broken, then 1.100.
• Key Near Term Resistance Per Daily Chart: 1.129, if broken, 1.132, and see Note 1 below.
• Momentum for the next 24-48 hours:
  • On daily chart – neutral outlook: The pair is still in the double Bollinger band (hence DBB) neutral zone (bounded by upper and lower orange lines).
  • On 4 hour chart – neutral outlook with negative bias: Since yesterday’s post the pair has moved up a bit from its lower DBB “sell zone” (bounded by the lower orange and green bands) to the lower end of its neutral zone, thus the minor upgrade. Beware that it faces near term resistance from its 50, 10, and then 20 candle EMAs and from the 1.126 area.The key point here is that these reinforce our negative bias for those trading on the 4 hour charts, hence we see shorting the pair as described below as the safer way to trade the IMF payment.
  • On 1 hour chart – Upward outlook with negative bias: Since yesterday the pair is at the lowest extreme of its double Bollinger band sell zone.

As always, minimize risk of loss and of emotion-driven trade decisions by having pre-planned stop loss orders ready.