Scalping Opportunity In The EUR/USD

As far as trading strategies go, scalping is one of the most affordable to execute. Using tight stop losses and modest profit targets can be a great way to engage the markets. Today’s bearish action in the EUR/USD may offer a premium scalping opportunity to the long.

During the U.S. pre-market session, the Producer Price Index (PPI) for October was released to the public. Here is a quick look at the hard numbers:

Event                                                                             Projected    Actual

PPI (MoM, Oct.)                                                               0.2%           0.6%

PPI Except Food and Energy (MoM, Oct.)                   0.2%           0.5%

In addition to monthly growth, each figure is up considerably year-over-year. This collection of PPI statistics is more supporting evidence for the FED’s policy of gradual tightening. It is little wonder that today’s CME FEDWatch Index has assigned a 76% chance of a ¼ point rate hike for December.

EUR/USD Technicals

The rout is on in the EUR/USD, with values falling almost 50 pips for the session. The Greenback has posted significant gains since Tuesday, driving the EUR/USD toward the 1.1300 psychological level.

Bottom Line: At press time, this market is trading in the neighborhood of 1.1320. If the intraday downtrend continues, then a long scalp from just above the Spike Low (1.1301) will come into play. Until elected, I will have buys queued up from 1.1306. With an initial stop at 1.1294, this trade produces a tight 8 pips on a sub-1:1 risk vs reward management plan.

In looking at the long-term picture for the EUR/USD, 1.1300 shows up several times as downside support, twice this year. Eventually, buyers will retreat from this level prompting a bearish break. With a bit of luck, this long scalp will provide a few green pips ahead of a directional move south.