FxWirePro: EUR/USD short setup on RSI divergence and failure swings at channel resistance

In this write-up, we reiterate that EURUSD interim upswings are not backed by technical indicators; the current prices are hovering at DMAs. 

Previously, weakness of this pair is observed at the same juncture on the occurrence of bearish engulfing and gravestone doji patterns at stiff resistance zone (i.e. 1.1466 - 1.1501 levels). For now, price dips seem to be most likely on RSI’s divergence that indicates overbought pressures (refer daily chart).

While the major downtrend has 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, hanging man 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, the current price still remains well below 21-EMAs despite today’s rallies in a short-run, bears are most likely to extend 1 and half year lows.

We could foresee more slumps on cards as both leading oscillators (RSI and stochastic curves) and both trend indicators (DMAs, EMAs & MACD) have been signaling intensified bearish momentum and downtrend continuation respectively. 

Trade tips: At spot reference: 1.1332 levels, contemplating above technical rationale, one can execute tunnel spread options strategy. Such exotic option with upper strikes at 1.1360 and lower strikes at 1.13 levels have been unbiased strategy but to favor slightly the bearish sentiments. 

Alternatively, shorting futures of mid-month tenors are advocated with a view of arresting further potential slumps. 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 27 levels (which is mildly bullish), while hourly USD spot index was at 78 (bullish) while articulating (at 06:28 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex