FxWirePro: EUR/USD Chartpack – Technical & FX Derivatives Trade Setup Ahead of ECB

EURUSD’s both minor and major trends have been travelling through sloping channels (observe daily and monthly plotting).

The minor downtrend is back in the sloping channel after the occurrence of hammer pattern at the channel supports. 

Although the bulls prompt the interim rallies, but the failure swings have been observed at 21-DMAs as both leading oscillators signal bearish momentum and the trend indicators signal downtrend continuation. As a result, shooting star candle has formed at 1.1034 levels.

The bulls are attempting to test strong channel support for the interim upswings that are not backed by both the momentum indicators (refer daily chart).

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).

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: 1.1026 levels, contemplating above technical rationale, one can execute boundary options strategy. Such exotic option with upper strikes at 1.1057 and lower strikes at 1.0925 levels likely to fetch exponential yields than the spot moves. 

Alternatively, ahead of ECB monetary policy that is scheduled for this week, 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. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.