FxWirePro: EUR/USD intermediary bulls curtail bearish momentum but don’t be scapegoat in bull trap – Use tunnel spread for certain yields

All signs of short term bear trend continuation as the euro has begun this week with incurring significant losses, as the pair trades at the 1.1206.

Whereas momentary bulls hamper the momentum in this bearish rout as they are holding firmly at supports of 1.1198 levels.

But ahead of today’s Fed funds rate and FOMC forward guidance on their monetary policy, bears may get lined up as the euro has retreated below 1.1198 levels by breaking this crucial supports on an intraday basis.

RSI (14): On the daily chart, this leading indicator has been converging to the price declines which means bearish strength is intensified (currently, daily RSI trending below at 42 while articulating).

This technical indication has begun evaluating the momentum ever since the prices tumbled below DMAs with a bearish candle of a big real body by taking the computation of last 14 day periods the magnitude of recent gains to recent losses in an attempt to signify the overbought pressures.

While %D crossover on the same timeframe has been maintained on the slow stochastic curve with every price dips again on daily (Currently, %D line at 42.6952, while %K line at 34.3514). Stochastic on the monthly basis has been indecisive but no proper trace of %K crossover that signifies weakness in the euro.

Currently, the pair is testing important resistance at 21DMA levels. Even if it holds the current levels, we see restricted upside potential at around 1.1461 levels, at this juncture momentum in previous rallies likely to collapse, long term downtrend seems intact, so no question of longs initiation for long-term investors.

Hence, we still project the pair’s prospect below or around 1.09 for Q3 end-2016 but for an intraday speculative basis one can buy option tunnel spreads considering upper strikes at 1.1238 (with 10 pips of tolerance to 21DMA) and lower strikes at 1.1203 (day open).