As stated in our previous post, EURUSD, after breaking down crucial supports in the recent past, has now surpassed 1.0992 also.
As bears have, now, managed to breach wedge support decisively with the stern bearish engulfing pattern candle, ever since then it has created renewed selling pressures and the pair has been extending the prevailing downtrend and kept well below 21-DMAs, while both leading and lagging oscillators are also in line with the price slumps (refer daily chart).
The prices remain under pressure after breaking 1.0932 levels as the focus now turns to the more important 1.0831 pivot support region (i.e. 78.6% Fibonacci level), as a breakdown there will suggest further dips to the last month’s 1.0630 lows.
Otherwise, we need to see a recovery through 1.1146 - 1.1250 resistance to alleviate the consolidation phase and take us back to an upper range.
On a broader perspective, we perceive the pullback from 1.2600 as corrective and look for a higher low over the 2017 1.0340 lows, ideally in the 1.09 to 1.08 region.
While we are optimistic that the low was set in October at 1.0879, we don’t have full confirmation yet. A decline through 1.0932 medium-term support would increase risks that we re-test those lows.
Accordingly, we advocated short hedges for EURUSD couple of days ago, we now continue to uphold the strategy on hedging grounds.
The Strategy: At spot reference: 1.0904 levels (while articulating), although we could see some abrupt rallies for today, contemplating above technical rationale, one can execute boundary options strategy. Such exotic option with upper strikes at 1.0930 and lower strikes at 1.0837 levels likely to fetch exponential yields than the spot moves.
Alternatively, we recommended shorts in EURUSD futures of May’20 delivery for the major downtrend, we now wish to uphold these positions on hedging sentiments.
