FxWirePro: EUR/USD trend goes in narrow range after shooting star – Boundary trades and short hedge as bears develop head and shoulder pattern

Technical Chart and Candlestick Pattern: We wrap up 2018 and bid New Year wishes for our readers with reiteration of EURUSD’s interim upswings that are not backed by technical indicators as shooting star formation at 1.1409 levels hampers previous bullish sentiments; the current prices are hovering at 7DMAs and drifts in a narrow range for today.

Previously, the weakness of this pair is observed at the same juncture on the occurrence of bearish engulfing and shooting star patterns. Currently, the price dips seem to be most likely as RSI shows faded strength that indicates overbought pressures (refer daily chart).

While the major downtrend has been forming head and shoulder pattern which is nature, with head at 1.2555, left shoulder at 1.2092 and right shoulder at 1.1815 levels, where bears retrace more than 50% Fibonacci levels from 2018 highs on the failure swings at channel resistance that develops head and shoulder pattern as both leading oscillators signal bearish momentum (refer monthly chart).

Overall, we could foresee more slumps on the cards as the current price still remains well below 21-EMAs despite recent time’s rallies, bears are most likely to extend 1 and half year lows and retrace 61.8% Fibonacci levels of January 2018 highs (i.e. 1.2612) and January 2017 lows (i.e. 1.0371 levels) (refer monthly chart). 

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: 1.1405 levels, contemplating above technical rationale, one can execute options strategy with boundary strikes. Such exotic option with upper strikes at 1.1413 and lower strikes at 1.1380 levels that’s 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 -31 levels (which is mildly bearish), while hourly USD spot index was at 37 (mildly bullish) while articulating (at 06:48 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex