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FxWirePro: EUR/USD Chartpack – Technical and Hedging Setup

EURUSD’s shooting star is traced out at 1.1077 levels. The bearish pattern sends early signals for minor trend to show failure swings at the channel resistance (refer daily chart).

Interim upswings appear to be exhausted on overbought pressures, while both trend indicators are indecisive but slightly bearish bias. Although momentum oscillators bullish bias but overbought sentiments and faded strength is observed.

Failure swings at the channel resistance have nudged the prices below DMAs in the recent past.

The pair sliding from the recent highs of 1.1179 to the current 1.1000 levels, thereby, the interim rallies seem to have been absolutely exhausted from the last 2-3 days upon the overbought sentiments signaled by the leading oscillators.

We advocated directional positions for EURUSD couple of days ago, please refer below weblink for more reading on them:

https://www.econotimes.com/FxWirePro-EUR-USD-Directional-Hedges-As-Minor-Trend-Tests-Sloping-Channel-Support-Major-Trend-Fails-At-Channel-Resistance-1565964

We now continue to uphold the similar type strategy on hedging grounds ahead of Fed and ECB monetary policies scheduled for the next week.

While the major downtrend has also been sliding through sloping channel, where bears retrace more than 61.8% Fibonacci levels (almost 78.6%) from 2018 highs on the failure swings at channel resistance, as both leading oscillators and lagging indicators still signal bearish momentum, the downtrend continuation seems to be most likely (refer monthly chart).

Shooting star pattern pops-up at peaks in the major trend, ever since then you could make out bears have shown their effects, steep slumps have gone below EMA levels and retraced more than 61.8% Fibonacci levels of January 2018 highs (i.e. 1.2612) and January 2017 lows (i.e. 1.0371 levels) (refer monthly chart). 

The Strategy: At spot reference: 1.1092 levels, contemplating above technical rationale, we advocate longs in EURUSD futures contracts of December’19 delivery, simultaneously, shorts in futures of Feruary’20 delivery for the major downtrend. The short leg is likely to hedge potential slumps and the momentary upside risks can be arrested by the long leg. Thereby, one could be able to directionally position in their FX exposures on hedging grounds.

By Niranjan Patil
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