FxWirePro: EUR/USD Shooting Star Counters Triple Bottom, Major Trend Continue To Consolidate On Hammers – Trading & Hedging Setup

Euro crosses are slightly edgy as the main focus tomorrow will obviously be the ECB's monetary policy announcement, although we expect no major new policy initiatives. EURUSD is down marginally about -0.08% (trading at 1.1401 levels).

Technically, the minor uptrend of this pair seems to be exhausted on shooting stars formation coupled with overbought pressures, the frequent occurrences attempt to nudge prices below stiff resistances of 1.1429 levels, more rallies likely only on breakout (refer daily chart).

The choppy move higher continues with prices nudging through the 1.1429 previous highs. Momentum remain in bull mode but overbought pressures cannot be disregarded, as such, while over 1.1340-1.1300 support, a further grind towards the 1.1495-1.1600 medium-term resistance region is still on the cards. A decline through that support would suggest a false break of 1.1422 and a return to the range over 1.1170, with the risk of a re-test of that support region.

On a broader perspective, bulls bounce back upon hammer formations.0952 and 1.1101 levels, and now on the verge of hitting 4-months highs, while the consolidation phase in major downtrend retraces 50% Fibonacci levels (refer monthly plotting).

Both leading & lagging oscillators appear to be bullish bias on this timeframe. The rally from 1.0635 is approaching an important juncture around 1.15-1.16. This is still expected to define the top of a medium-term range. However, a clear break of this region would suggest potential for a return to the 1.20-1.25 region again.

Trading tips: At spot reference: 1.1396 levels (while articulating), although minor trend is bullish, we could foresee some dips for today but can get some cushion at 7 & 21-DMAs, contemplating short-term technical that indicates intraday selling sentiments, one can execute tunnel options spread strategy. Such exotic option with upper strikes at 1.1429 and lower strikes at 1.1350 levels likely to fetch exponential yields than the spot moves. The strategy can get assured yields as long as the underlying FX keeps dipping but remains well above lower strike.

Alternatively, we recommend directional positions on hedging grounds, hence, go shorts in EURUSD futures of July’20 delivery for the major downtrend. Simultaneously, activate long hedges of August tenors. Thereby, one can ensure directional positions amid macroeconomic turmoil.