When Goldman speaks, close your ears

An interesting week with Mr Draghi announcing a cut of 0,1% to the Euro interest rate and expanding (in time) the QE. The markets where expecting more ?? from Mr Draghi, mainly to expand QE and accept more assets. Goldman’s strategist, 24 hours before the announcement predicted a drop of 2-3 big figures (200-300 pips). You can imagine the number of opened short positions for such a profit and the number of sell stops above. 30 minutes before the announcement FT leaked that there is no interest rate cut, increasing the number of shorts (and stop losses). As a result after the “unexpected??” announcement the pair (and all Euro pairs) moved in a way similar to the first announcement of the QE but not in the announced by Goldman and FT direction.
The Gbp followed?? the move and so did the Chf but in a much stronger way for the Swissy.
Examining the different pairs we now have important retracements. I have been speaking about retracements the last weeks but I did not expect such moves. The market is not acting as a ping pong game, so it could a) just wait and digest current levels, b) move a little in the direction of the initial move and bounce or c) start moving in the opposite direction but in a much slower speed. This statement is not making you wiser since this is what the market does all the time. The answer relies on probabilities, so I think that option c is the most probable by let’s say 50% and 30% for digestion and 20% for upper continuation. Sorry but trading is not an exact science.
The way to approach the market is by going to lower time frames and draw trendlines under the eventual up moves. When those trend lines get broken it is the signal to short the market. This applies to Eur/Usd, Gbp/Usd, Eur/Jpy and Eur/Aud.
Gbp/Aud offers a much safer setup and could be traded short from the open of the week.
You can see detailed setups for all pairs and charts in the 20min video that follows.

 

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