Citi quickly blown out of EUR/USD short recommendation, they weren't alone
There is a tough balance between jumping in on a trade because of the news and being patient. Technical analysts at Citi came out with a quick recommendation after the ECB decision on rates but before the press conference. They said to sell at spot (1.0867 at the time) with a stop loss at 1.1080 and a target at 1.04-1.05.
Needless to say, their stop was hit about an hour later for a 213 pip loss.
In hindsight, the trade was to buy the euro when Draghi said the ECB doesn't see any need to reduce rates further.
It's easy to poke fun at Citi today or anyone who leaned out with a call. On the face of it, the news was bearish. Even with the statement about not cutting rates further, I still think there's a good case to sell. The second part of that statement qualified it by saying "if the economy performs as expected." Draghi also talked about using other instruments to ease.
On the US dollar side of the equation, initial jobless claims were the best since October and there's a good chance the Fed could be more hawkish than expected next week. I wouldn't fight this kind of upward momentum but there will be a time to short the euro.
So here's the lesson I take from Citi. They were wrong, but they used a stop loss. If not, the trade would be another 120 pips underwater. Even if the position was small, the 213 pip loss is a tough one but the trick is to always live to fight another day.
