FxWirePro: EUR/USD Chartpack – Technicals & Trade Setup Ahead of ECB’s MPS and US Employment Data

EURUSD’s both minor and major trends have been traveling through sloping channels (refer daily and monthly charts).

The stern bullish streaks have been observed at the beginning of this week, bears have counted yesterday with a shooting star at 1.1220 level. However, the interim upswings are backed by both the momentum indicators and trend indicators; consequently, the current prices are spiking above 7 & 21-DMAs with bullish crossover (refer daily chart).

Nevertheless, it should not be deemed as a reversal of major downtrend which is bearish. 

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). 

Overall, the current minor trend seems to be little bullish but the major downtrend still remains intact as the current price are still well below 21-EMAs despite current rallies in a short-run, bears are most likely to extend major downtrend and hit 2-year lows again.

We could foresee more slumps on 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: 1.1232 levels, ahead of ECB’s monetary policy statement, contemplating above technical rationale, one can execute boundary strikes options strategy. Such exotic option with upper strikes at 1.1261 and lower strikes at 1.12 (i.e. 7DMA levels) likely to fetch exponential yields than spot moves. 

With a policy statement to be released at 13:45 CEST followed by a press conference at 14:30 CEST. We expect the ECB to maintain its easing bias, with no new additional stimulus measures announced, by choosing this strategy, one can participate in the prevailing rallies but not disregard major trend which is bearish.

Alternatively, ahead of US unemployment and non-farm data announcement are the key data focus for the week, 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 47 levels (which is bullish), while hourly USD spot index was at -104 (highly bearish) while articulating (at 05:47 GMT). 

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