hussein.ahmed
Short

Medium term view on EURUSD

FX:EURUSD   Euro Fx/U.S. Dollar
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My last post about this pair was to stay neutral as there is no trend in action. Prices of this pair are currently in consolidation and for medium to long term traders this is a point of no profit. In my last post I suggested that for a conservative trader, we should wait for prices to either break above the 1.170 resistance or the 1.045 support.

ECB, Mario Draghi
Mario Draghi comments brought the Euro             down the most since 3 months, creating a bearish engulfing candle that might take the Euro             to fresh new levels. Euro             investors have been receiving mixed data on the Euro             zone economic development, which stands the reason behind this consolidation and indecision reflected in price action. Today's move however was of a different kind, it was very volatile and straight to the point, something that we have not seen for long. Investors are now piling up short positions as the sentiment changed, given that the Euro             is already too cheap against the US dollar             , traders are positioning themselves that it might need to get even cheaper to see a positive gradual effect on the Eurozone economy, given the global economic slowdown, political problems, monetary policy divergences and so on. The Euro-zone is currently fighting deflation using QE             program started last March and is due to end on September 16, Draghi suggested that another round of stimulus is ready on table in case the Euro             growth needed more artificial support, or even a rate cut. Many big financials are expecting a QE2 in 16, due to a fragile Euro-zone economy dampened by slowing emerging markets & commodity prices.

So what?
Investors now are going to keep a wide eye on economic data that could show any signs of recovery in the Eurozone. Last month the Euro-zone inflation rate fell below 0 for the first time, signaling red flags about a stagnating economy, and a possibility of further easing. Another factor investors will consider, is the divergent monetary policy in the US. Many economists refrained from December rate hike estimations and delayed it till March. The US economy is showing signs of recovery in the job & housing markets, with inflation still dampened by commodities . Corporate America earnings are not showing very good signs of recovery, with almost 77% of reporters missed analysts estimates. At the end of the day a rate hike is coming, no matter what. What we could conclude is that the Euro             has a higher probability depreciation during the longer term. For that we head for the technical analysis to spot smart opportunities to enter the market.

Moving Averages (200 (blue) & 50 (black))
After today's ECB meeting, prices went down to trade below the 200 DMA & 50 DMA, suggesting a bearish bias on this pair. But before jumping into a trade, I prefer to be conservative enough and wait for further confirmation. Today's candle broke and closed below a major pivotal support of (1.11041), this gives us a bearish sentiment. The next target support would be at the previous double bottom of July & August at 1.0800 round level.

The 1.0800 level? (BLACK DOTTED LINE)
Breaching and closing below this level would be a stronger confirmation of price action leading to the downside and that is where I would start to add short positions after waiting for a re-test of that level. The re-test must fail to break above that area or else we would still be in consolidation and I would avoid trading this pair.

My stop loss is always set 3-5% of my investment value, and I set no take profit, as I keep riding the trend until a retracement hits my stop.

Thank you for reading, please follow, like & comment your thoughts. Have a nice day.


johnwan1116
a year ago
thanks, good analysis.

Are you gonna add to your short positions after breaking the black solid upward trendline?
+1 Reply
hussein.ahmed johnwan1116
a year ago
@johnwan1116 I have not shorted this pair yet, I will only short when it breaks the black dotted line or the 1.08 round level, and NOT after breaking the black solid upward trend line (for further confirmation). You may short after breaking the black solid upward trend-line, but you will be jumping into the market quite early. We might need to look for green candles to the upside, and assess their momentum before we could make a decision here. You could actually take very small positions after breaking the solid line, in order to not miss an opportunity.
Reply
hussein.ahmed
a year ago
@johnwan1116 I have not shorted this pair yet, I will only short when it breaks the black dotted line or the 1.08 round level, and NOT after breaking the black solid upward trend line (for further confirmation). You may short after breaking the black solid upward trend-line, but you will be jumping into the market quite early. We might need to look for green candles to the upside, and assess their momentum before we could make a decision here. You could actually take very small positions after breaking the solid line, in order to not miss an opportunity.
Reply
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