Follow Up - Long EUR/USD & Yesterday's gold Idea

30 July, 2009 by Stephen Leahy

Boston July 30 08:47 EST

Yesterday we put out a technical analysis note on Gold. We saw a potential for one of our favorite technical set ups, the "false breakout". The trade was not triggered because the second rule for the set up did not happen. This posting is just a reminder that trading rules are there for a reason. Set up your trading rules prior to analyzing any potential trade and stick to the rules you set. We saw the setup but waited for the confirm. Without the confirm, we did not enter and we saved ourselves from a losing trade. Too many traders jump at the first signs of a trade set up and are then in a position of "hoping" the trade goes their way. But leveraged markets such as FX, futures and options crush hope. So don't "hope". Only go into trades with high degrees of confidence.

As for our EUR/USD and GBP/USD positioning, we go back 10 days to our posting from July20 (www.backbayfx.com/blog.php). We reversed our thinking on USD strength and decided that we just needed to wait for a pullback in EUR/USD and GBP/USD to go long those pairs. With the pullback of the last 24 hours, we are ready to pounce on EUR/USD (current bid 1.4059). We buy EUR/USD at market with a target price level above 1.4700 (intraday high in Dec 2008) and a Stop Loss order in effect only if we close two days in a row below 1.3750 (base of recent consolidation). We are not changing our neutral positioning on GBP/USD at this time....too much bad fundamental news coming out of the UK lately.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

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