Considering the prevailing market themes and how strong the bearish sentiment was on Monday, I was really only looking to do one thing last week - SELL. To be more specific, sell in favor of the dollar. I had some XXX/USD shorts planned out, as well as a USD/JPY long trade. But of all these, only one trade materialized - a short EUR/USD setup.
Ideally, I wanted to catch EURUSD on a retracement and hopefully ride it for the entire week. But I knew that that would be an unlikely event since the moves we saw were pretty strong and pretty much one-directional. So in my head, I told myself I only had 2 options: either wait for a shallow retracement, or play the breakout.
I chose to play a shallow retracement because I didn't like the risk-reward ratios that the breakout setups entailed, and I wasn't psychologically comfortable aiming for fresh lows.
Knowing that price may not pull back to the deep Fib levels, I set a sell order anticipating a shallow retracement. And just in case I was wrong, I set a wide stop, too. Luckily, it all turned out well, though it took a while before my order got triggered.
Anyway, I was able to short the pair at exactly 1.3400 on Thursday, which was as high as it got for the rest of the week. I was prepared to hold onto the trade for a couple of days because two reasons. First, I didn't see any reason why the sell-off should end. And second, because I had set a wide stop (at least relative to my usual stops).
Funny enough, I really was able to ride the pair all the way down. Literally an hour before the market closed for the weekend, I closed my trade for a 175-pip win and a pretty decent reward-to-risk ratio. Needless to say, it felt extremely fulfilling seeing the trade going exactly as planned. If only all trades were like this, eh?
This week, I don't think we'll see the same one-directional moves. So far, most pairs have been able to recover and maintain the bullish run from the weekend gap. I think we'll either see a slight recovery this week, or perhaps a bit of ranging action. I don't think Europe can go on without making some solid resolutions, and it seems to me that most pairs are overdue for a sizeable retracement already. In any case, I think this week, I'll be more flexible with my bias since there are plenty of potential sentiment-shifters ahead.
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