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ECB high impact news forces traders to fade or play breakout

ECB Minimum Bid Rate, press conference

Tonight at 7.45pm ECB announces its Minimum Bid Rate followed by press conference at 8.30pm. At the very least EURUSD and Euro crosses are all affected but based on the zombie-like movement in the market this week and last, almost the whole market is waiting with bated breath for ECB President Draghi to give out some bazookas.

I don’t encourage swing traders to put in positions now unless one has some throwaway money to place bets. It would be very difficult to determine stops. I don’t mind to lose when I bet wrongly but getting it right and getting stopped out because of some very ugly price spikes or slippage is not my cup of tea. As for scalpers, I have a hint: read this blog, watch the embedded video and then form your opinion with the following charts.

 

What these currency pairs say

EURUSD

EURUSD daily chart

Daily time frame

 

  1. EURUSD is in the 5th week of a down trend that has seen little or no retracement.
  2. At the moment it has retracement 76.4 Fib-R of the previous flow.
  3. The current chart pattern could as easily become a pennant pattern (down continuation) or a small triple bottom (reversal).

 

EURUSD 4-hourly chart

4-hourly chart

  1. If you subscribe to bullish camp, a triple bottom pattern is confirmed only when price breaks resistance aka neck line decisively.
  2. If you subscribe to bearish camp, a continuation flag or channel is confirmed when price breaks support.

Conclusion: Price is very extended and an attractive level for bulls. We could say anything about the strength of the trend and the associated price pattern so price really could swing both ways. As for lower time frames, a 2-week support is as good as any other so be mindful of failed breakouts. In fact fading any breakouts is always a better trading plan.

 

USDJPY

USDJPY daily chart

Daily time frame

  1. This pair is at resistance now and price action definitely confirms that market is also watching the same level.

Conclusion: Pre-high-impact-news charts are all perched at support or resistance forcing traders to choose playing a breakout or fading one. 2 man enters one man must die.

 

USDCHF

USDCHF daily chart

Daily time frame

  1. USDCHF is so-‘evil-twin’ of EURUSD.

Conclusion: Whatever I wrote of EURUSD applies here.

 

USDSGD

USDSGD daily chart

Daily time frame

  1. USDSGD is definitely in a down trend and ready to do a bull trap based on May resistance.
  2. Price is at a 38.2 Fib-R and qualifies for a 1-2-3-4 continuation setup.
USDSGD 4-hourly chart

4-hourly chart

  1.  4-hourly chart shows double top reversal pattern at daily chart resistance level. Although the neckline is broken, I would not be surprised if price retraces to retest this level or even if a dead cat bounce were to appear.

Trading a breakout or fading one?

It is not at all surprising to find that price ‘mysteriously’ positions itself prior to a high impact news so that traders are forced to choose between playing breakout versus fading a breakout once the ECB high impact news comes out.

Traders who do not have open positions prior to such news should keep cool. Not playing is sometimes a good strategy too. As I mentioned earlier, you can be right about the outcome but still get stopped for various reasons. Wait till the news comes out and commit when a clear price trend emerges. Between playing breakouts and fading one, I always choose to fade one unless I have already entered way earlier.

As for those who already got position, put in wide enough stops that you are comfortable with and strap yourself in for some excitement.

6Shares

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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