How to Trade Bounces on the Euro

11/08/2012 3:16 pm EST

Focus: FOREX

Marc Principato

Director, SMB Forex training Program

Learn how Marc Principato is making money on the euro, and also a few tips on how to use the S&P as an indicator for currency trading.

The euro has obviously been a currency that is on everybody’s mind.  It has been in the news lately.  We’re talking about that today with Marc Principato.  Marc, you are a currency trader.  What’s your view of the euro right now?”

Well, it’s been crazy, as we all know.  It’s all over the place.  It recently made new lows at $22.90 about a week ago and since then, it’s bounced to $26.  This morning I was looking at this thing pushing just $26.20, so we’re in a bounce mode right now.  This thing is working its way up.  It was oversold, so we’re just seeing a bounce.  I think overall it is still generally bearish, but as a short-term trader, I am looking to do whatever the market tells me to do and right now, it is pushing its way up.  Until I get some solid resistance, I’m going along.

I want to talk to you also a little bit about S&P futures.  I know that is also an area that you trade.  What’s your thought on that right now?

Well, here’s the thing.  The S&P is actually a really good indicator or filter to help me with my euro trading.  I am actually not as active in the S&P, but I use it to help guide my euro decision-making intraday; so basically what will happen is S&P will make new high; euro will typically make new high, euro against dollar.  If S&P does not make a new high, for example, and euro starts to struggle, I also know that there is now weakness in the euro; so again, it acts as a great filter to help me decide if I should hold this thing – my euro position – or should I get out now, or what should I do?  It helps me.

So are you actually trading S&P futures or just kind of using them as a gauge?

No, I am using them as gauge.  They are just simply a filter; so I have my S&P charts up right next to my euro, and it’s like I said.  If S&P is pushing highs, I don’t want to sell my euro.  If S&P is pushing lows, I don’t want to buy my euro; so again, it acts like a nice filter; a great guideline to go by.

Now I know that you are primarily a euro trader, but are there any other currency pairs or even with regard to the dollar; what should people be aware of right now?

Well, I mean, everything is pretty much tied with the dollar; all the majors, meaning dollar-yen, dollar-franc, pound-dollar, so there is a lot of volatility surrounding the dollar; so any of those majors.  You know it’s pretty much where there is a lot of action; a lot of volume as well.  As far as getting into like exotic pairs, I personally tend to stay away from them.  The spreads are too high; they are just too expensive to trade, and they are just not my style.  So, you know; if you’re a more conservative trader or if you’re a newer trader—in my opinion—you’re better off sticking to the majors.

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