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Guest Commentary: How to Create a Higher Probability Trade from an Uncertain EUR/USD

Guest Commentary: How to Create a Higher Probability Trade from an Uncertain EUR/USD

2012-11-27 15:30:00
Ed Matts, Technical Strategist

* The spike above 1.30 could have ended a correction for a final spike to 1.2610.

* But the EURUSD may just spike below 1.29 before resuming the recovery.

* We have sold short term with tight stops because these 2 views coincide looking to monitor price action between our most favored view and the most probable view.

Guest_Commentary_How_to_Create_a_Higher_Probability_Trade_from_an_Uncertain_EURUSD_body_Picture_1.png, Guest Commentary: How to Create a Higher Probability Trade from an Uncertain EUR/USD

We are short Euro Dollar but without much conviction because of 2 alternatives with similar probabilities.

The first and favorite but not most probable is that the Euro has completed a 3 wave corrective rally along the lines of September 1996 reinforced by the more recent October 28th similarity. Both of which suggest the Euro has ended a correction last night for new lows to the 1.2610 target before 1.3170 is spiked. So not most probable and also eventually a much better level to sell structurally.

The more straightforward and therefore more realistic and probable.. is that this is a trend rally to spike 1.3170 and therefore needs to produce a 5 wave trend sequence. The current reaction from above 1.30 should prove to be a C leg of an irregular correction that still targets a loss though of 1.2940 for 1.2875.

But it is the confluence of the two views that allows us to stay short for 1.2875 but being aware that as Euro holds 1.2825 or breaks 1.3020 it is has a real chance to test/spike the 1.3170 high.

Further videos or commentaries are available from or @EdMatts on Twitter.

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