EUR/USD Test of Channel Support Dancing Per FxWirePro’s Whims and Fancies - Directional Hedges Arrest Interim Bullish Tantrums

EURUSD has been spiking from the recent lows of 1.0879 to the current 1.1133 levels, but the interim rallies seem to have been exhausted from the last 3-4 days upon overbought sentiments signaled by the leading oscillators.

We advocate directional positions for EURUSD ahead of ECB monetary policy this week hedging grounds and they appear to be functioning as per trend projection.

EURUSD’s both minor and major trends were spotted out to develop descending channel patterns (observe daily and monthly plotting). 

As emphasized in our recent posts, the test of channel supports (at 1.0879) in the minor trend of this pair has proven to be conducive for the long leg in our directional hedging strategy as the underlying EURUSD spot began spiking above DMAs towards channel resistance with the bullish MACD & DMA crossovers and the intensified buying momentum from the last couple of days have also acted in our favor (refer daily chart).

While the major downtrend has also been sliding through sloping channel, where bears retrace more than 61.8% Fibonacci levels (almost 78.6%) from 2018 highs on the failure swings at channel resistance, as both leading oscillators and lagging indicators still signal bearish momentum, the downtrend continuation seems to be most likely (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).

The Strategy: At spot reference: 1.1175 levels, contemplating above technical rationale, initiated longs in EURUSD futures contracts of October’19 delivery. Thereby, the upside risks are arrested by the long leg. Simultaneously, shorts in futures of November’19 delivery for the major downtrend remains as it is likely to hedge potential slumps. One could be able to directionally position in their FX exposures on hedging grounds.