FxWirePro: Significance of EUR/USD’s descending triangle – Attain trade edge through double touch options and uphold short hedge

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

The stern bullish streaks have been exhausted last week itself at the channel resistance, consequently, we sensed weakness at the beginning of this week.

Bears have countered yesterday with a resembling bearish engulfing pattern at 1.1287 level. However, the bulls are attempting for interim upswings that are not backed by both the momentum indicators; the current prices are attempting to hovering at 7-DMAs with bullish crossover (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, the major downtrend still remains intact as the current price is 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: 1.1297 levels, ahead of Fed’s monetary policy that is scheduled for the next, contemplating above technical rationale, one can execute double touch options strategy. Such exotic option with upper strikes at 1.1325 and lower strikes at 1.1290 (i.e. 7DMA levels) likely to fetch exponential yields than 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 Fed and the US retail sales data announcement. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 31 levels (which is mildly bullish), while hourly USD spot index was at 57 (bullish) while articulating (at 06:08 GMT). 

For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex