Is it overbought? Will it turn down? Shouldn't we play for a top and for a short term pull back? etc. These are the questions which I see recently discussed on many forums, such as here on Tradingview too. But are these the correct questions we have to ask? Are these questions that can be answered in a straight simple way? No. My friends, the real question what we have to ask is: If we think a correction may be close, WHEN AND WHAT LEVEL should we enter a counter trend short? Or ask WHAT WILL BE THE SETUP where we can pull the trigger with higher confidence and with better risk reward in our favour! For sure it worths to watch, and of course the move has become almost vertical, and maybe USD Indx is overbought. Of course I also read all statistics about positioning being all time bullish in USD, espec against EUR. However no one should bet the other way, until the setup gives a green light to do so. Any other attempt before is gambling and may be harmful to our capital.
Let's see where are we now.
Daily (regular candles): We see a perfect bullish trend with acceleration (steeper second trendline) since the 88 level. We do not even see any negative divergence in the indicators. All Ichimoku lines are pointing up, Chikou Span is in an open space. The only minor "warning" that the Price at this high may be possibly stretched is that Price itself got a bit too far from Kijun Sen, and there is a convergence in moving averages, as MACD clearly shows, MAs struggling to widen further. We have to realise that the 92,40 level is becoming the most important to watch, as there we have a horizontal support (prev resistance) together with Tenkan Sen, and also we have the inner trendline exactly matching both of the two other support lines! (All marked by blue ellipse)
Heiken Ashi (mid panel): Let's filter some noise. HA candles are still green, with no lower wicks, so considered as bullish. But if we look at haDelta, a bell starts ringing. As the body of the candles are getting smaller, haDelta is turning down and crossing below its SMA3 line. Also we see a short term negative divergence developing in the indicator. It's time to watch for a swith in HA candle shape and/or colour.
4 Hrs: This is the time frame to focus on timing if we look for a counter trend short entry. The picture painted by Ichimoku still looks bullish, but I see some problem with ADX, which regrdless higher and higher Price can not really increase, so there is no acceleration in the bullish momentum suggested by DMI itself. OK, but where will be the place to go short in case, with higher probability to win? 92,40 (!): Kijun Sen, Senkou B (future Kumo bottom), horizontal key supp/res, and soon the 100 WMA will catch up there too. Confirmation of a counter trend would be a break below 91,80.
So we answered the only and most important question! The level to watch both on daily and 4 Hrs time frame is 92,40.
p.s.: If you think EUR is oversold, I can tell you it is not. Looking at other crosses it is still too strong. Do not underestimate the ECB and any form of QE in the long run. However I also think the USD rally is stretched. How the DXY will destill it I don't know. Short term there can be a spike in EURUSD if ECB "disappoints" those who expect them to go all in, so the counter trend short in DXY may work below 92,40. But do not fall in love with the bearish counter trade, trail your stop in time. I will keep you posted if I see any further interesting signals.
Comments
Ansari
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hi kumowizard ,many thank's.
very nice chart.
my target is fib 50%(95.87)
A-shot
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Take the recent rally top and count a 50% fib from it is also a possible retrace level
Kumowizard
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Ah, I forgot about one idea.
If you are looking for a trade to catch a "negative" (less positive than expected) ECB outcome, you can look at 6/March/2015 (44 Days) maturity 1,2000/1,2200 EURUSD Call spread.
On EURUSD chart the Kumo top is at 1,2020. If ECB's QE announcement comes less dovish, we may see a sudden spike of few hundred pips in EURUSD, however to go much above the Kumo is very unlikely.
So buy 1,20 Call vs Selling 1,22 Call. Mid price of the spread is abt 28 pips, which is the maximum risk on the position that one can loose within 44 days.
A-shot
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I never did forex trades, but eur/usd is something im looking into...and shorting dollar...and that swedish crona
Kumowizard
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I still prefer rather NOK than SEK, as Riksbank is as dovish as ECB, they may announce unconventional steps too (negative rates). But in fact both Scandinavian ccy should strengthen from macro perspective as their economies are doing fine.
A-shot
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Well, Sweden may have some more downgrading plans as i see. Not to mention their housing market goes worse. NOK is stronger indeed
Kumowizard
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A lot of professionals got very wrong on NOKSEK early this year. They expected it to go sub 1,00. Then boom 1,07! One more thing. I see more like Oil is trying to build a bottom here ard 45-47 (WTI). If finally shows some form of correction, that could help NOK further.
Kumowizard
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4 Hrs weak Tenkan/Kijun bearish cross, DMI negative with increasing ADX, Slow Stoch turning down. Also my combined ROC71-ROC91 indicator shows some short term increasing bearish momentum ahead. The key level to watch is the same at 92,40!
Obviously it will become very volatile today during ECB press conference. As always, make sure this time as well you adjust your position sizing and stops based on volatility.
very nice chart.
my target is fib 50%(95.87)