We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Gold
Mixed
Oil - US Crude
Bullish
Bitcoin
Bearish
More View more
Real Time News
  • Heads Up:🇯🇵 JPY All Industry Activity Index (MoM) (DEC) due at 04:30 GMT (15min), Actual: N/A Expected: 0.3% Previous: 0.9% https://www.dailyfx.com/economic-calendar#2020-02-21
  • Feb 28: - Fed speak - US🇺🇸 income/spending data, consumer sentiment - India🇮🇳 + Canada🇨🇦 GDP - Consumer confidence: New Zealand🇳🇿 + UK🇬🇧 - CPI: Germany🇩🇪, France🇫🇷, Italy🇮🇹 + Eurozone🇪🇺 - South Korea🇰🇷 industrial production Click here ⬇️to learn more https://www.dailyfx.com/webinars/146770987
  • Feb 27: - Bank of Korea🇰🇷 rate decision - French🇫🇷 President Macron meets with Italian🇮🇹 Prime Minister Guiseppe Conte - Norway🇳🇴 sov wealth fund publishes annual report - US GDP🇺🇸, durable goods data - Economic confidence data in Italy, Eurozone🇪🇺 - Vietnam🇻🇳 trade + CPI
  • Feb 26: - EIA crude oil 🛢️inventory report - South African🇿🇦 Finance Minister presents 2020-21 budget which will likely impact their sovereign credit rating - Hong Kong🇭🇰 GDP - US new home sales🏠learn why housing is important here: https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2019/12/30/Why-Markets-Will-be-Closely-Watching-Housing-Data-in-2020.html
  • Feb 24: - Trump meets with Modi - German🇩🇪 IFO business confidence - New Zealand🇳🇿 retail sales - China🇨🇳 may announce decision to delay annual meeting National People's Congress Feb 25: - World Bank President speech - GDP: Germany🇩🇪, Mexico🇲🇽 - US🇺🇸 Consumer Confidence
  • Hello there, traders! We may have a potentially volatile week ahead of us against the backdrop of panic from the #coronavirus🦠: Feb 22: - #G20SaudiArabia (Main topic will be global impact of virus) - Results from #IranElections2020 (hardliners expected to make a big splash)
  • The #Euro may bounce after hitting the lowest level in close to three years against the US Dollar. While the broader trend points firmly lower, selling pressure may be ebbing. Get your market update from @IlyaSpivak here: https://t.co/697SQ9AGxw https://t.co/BLxeiLzcLR
  • Commodities Update: As of 03:00, these are your best and worst performers based on the London trading schedule: Silver: 0.45% Gold: 0.27% Oil - US Crude: -0.57% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/3CldFB8zgt
  • RT @YuanTalks: #China's passenger #car sales slumped 92% y/y in the first half of February due to the #coronavirus outbreak, said the Passe…
  • My trading video for today: 'Dollar's Run Earns $EURUSD, $USDJPY and $AUDUSD Breaks; Nasdaq Fronts Risk Retreat' https://www.dailyfx.com/forex/video/daily_news_report/2020/02/21/Dollars-Run-Earns-EURUSD-USDJPY-and-AUDUSD-Breaks-Nasdaq-Fronts-Risk-Retreat.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/nUMqyxrVag
Dollar: Always Question Moves, Even When They Favor Your Trades

Dollar: Always Question Moves, Even When They Favor Your Trades

2018-05-26 03:10:00
John Kicklighter, Chief Currency Strategist
Share:

Talking Points:

  • Most traders spend a considerable amount of time evaluating opportunities before entering a trade
  • We should dedicate the same effort to qualifying market intent and conviction after a trade is on
  • I weigh in on the Dollar's bearing and potential with my EUR/USD short in mind

What makes for a 'great' trader? Strategy is important but there are many ways we can analyze to good trades. The most important limitations and advances are found in our own psychology. Download the DailyFX Building Confidence in Trading and Traits of Successful Traders guides to learn how to set your course from the beginning.

Evaluating Trades Before and After You Put Them On

Disciplined traders will put considerable time into evaluating the potential and probability behind a setup before placing a trade. However, it is just as important to regularly assess the performance of a position that is already on the books as a mere possibility before capital is placed behind the view. Despite our best intentions and the effort we put into establishing the most appealing conditions, trades do not always work out as expected. Sometimes the position goes astray from the time it is placed and other times favorable winds stall out or even turn against us well beyond the point of maturity. The longer a position is held, the more time there is for conditions and sentiment to swing against us. What would you do if a profitable trade hadn't hit your target but the underlying factors that inspired the pursuit in the first place started to evaporate? If a setup no longer meets the criteria for conviction that initially prompted the exposure, it stands to reason that you should close the position out and either wait for the factors to realign for re-entry or to move on to a different market and/or opportunity.

Dollar: Always Question Moves, Even When They Favor Your Trades

The Dollar's Recovery Catches Up to Expectations

I had been watching the Greenback's slow burn throughout 2017 seeking out the source of conviction behind such a persistent and counter-intuitive run. The retreat contradicted traditional fundamental themes such as relative growth and monetary policy. Deviating from speculative norms is not unheard of, but the departure rarely last for long. After three months of consolidation at the beginning of this year, it seemed like the productive slide of the previous year had finally been spent. When the upswing began to gain definable traction last month, the technicals looked to align with fundamentals. Breaking a the upper bound of obvious range led to subsequent clearance of the past year's trendline and then further the 100 and 200-day moving averages. It seemed that finally the market was appreciating the benchmark currency for the discount on a growth, monetary policy and yield basis that had become so exacerbated through the preceding slide. That said, my confidence in the upswing has never truly hit the degree of conviction that I usually consider reason to leverage exposure - usually 80 to 99 percent confidence (I am never 100 percent confident of everything).

What is Driving the Dollar - And Where are the Cracks

Over the past months, there have been a few high level fundamental themes that have driven the broader markets to an accelerated trend or towards reversal. Yet, none of these factors had materially highlighted the potential behind the Dollar. Relative growth for the US to its counterparts has held reliable level. Political risk and trades wars may seem a path to concentrate power towards the USD, but the opposite is more risky and likely. Many believe that monetary policy was the dormant bullish bid that would awaken speculative appetite. However, as prominent as the disparity in policy has been for the Greenback, the implied yield and DXY had deviated for more than six months. A sudden reversion is possible, but we hadn't seen a surprise upgrade for the US policy path nor a universal collapse in intent for global counterparts. All told, there was little in this fundamental mix to promote a reliable appetite for the currency. The exception was speculative positioning. Net speculative positioning last month on Dollar futures exposure was the most heavily net short in five years while the net long exposure to the EUR/USD has just recently come off a record.

Dollar: Always Question Moves, Even When They Favor Your Trades

Whether to Cut or Hold EUR/USD Moving Forward

In the past six weeks, as the Dollar has mounted its recovery, there has been markedly little change in the USD's fundamental prospects. In fact, growth forecasts have cooled (perhaps not faster than counterparts) and political risk has clearly intensified around the United States. Many bulls believe the reversal in fortunes for the benchmark currency and EUR/USD was the eventual but inevitable effort to close the gap between spot markets and rate forecasting. It is highly unlikely the Dollar moves up to meet rate forecasts, but this dynamic may further shape performance through the immediate future. That risk considered, the implied yield in December 2018 Fed Fund futures has shown a clear retreat from its near decade high this past week. If monetary policy is the foundation of any confidence you maintain for the Dollar, beware. Personally, the primary source of my confidence is the speculative exposure and the growing pull by global investors to redistribute capital to 'safer' positions. There is enough in my fresh evaluation of EUR/USD to keep my in the short, but I will be trailing up the stop and watching volatility with conviction diligently. We discuss the importance of evaluating positions mid-trade and against the context of the EUR/USD in this weekend Quick Take Video.

Dollar: Always Question Moves, Even When They Favor Your Trades

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.