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FxWirePro: EUR/USD bears back in action as upswings fizzle at 21-DMAs on gravestone doji – Trade one-touch calls and short hedges ahead of ECB

EURUSD’s both minor and major trends have been traveling through sloping channels (refer daily and monthly charts).

The minor downtrend is back in the sloping channel after the occurrences of back-to-back dojis and spinning top patterns. The bulls prompt the interim rallies but failure swings have been observed at 21DMAs as both leading oscillators signal bearish momentum and the trend indicators signal downtrend continuation.

Gravestone doji has occurred at 1.1253 levels, ever since then, the bears have resumed plunging prices below DMAs again. However, the bulls are attempting for the interim upswings that are not backed by both the momentum indicators (refer daily chart).

Nevertheless, it should not be deemed as a reversal of major trend which is still bearish. 

The major downtrend has also been sliding through sloping channel, where bears retrace 61.8% Fibonacci levels from 2018 highs on the failure swings at channel resistance as both leading oscillators signal bearish momentum (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). 

Overall, although the current minor trend seems to be little bullish, but the major downtrend still remains intact as the current price are still well below 21-EMAs despite current rallies in a short-run, bears are most likely to extend major downtrend and hit 2-year lows again.

Upon a foreseeable outcome, more slumps seem to be on the cards as both leading oscillators (RSI and stochastic curves) and both trend indicators (EMAs & MACD) have been signaling intensified bearish momentum and downtrend continuation respectively. 

Trade tips: At spot reference: 1.1237 levels, ahead of ECB’s monetary policy that is scheduled on 25th July, contemplating prevailing rallies and the above technical rationale, one can execute boundary options strategy. Such exotic option with upper strikes at 1.1265 and lower strikes at 1.1193 (the recent lows) likely to fetch exponential yields than the spot moves. 

Alternatively, shorting futures of mid-month tenors have been advocated with a view of arresting further potential slumps, we now wish to uphold the same strategy ahead of the European monetary policy. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

By Niranjan Patil
  • Market Data

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