1,0290 a tentative target for the EUR/USD

Outlook:

• As mentioned a few days ago EURUSD had the potential to become a corrective and overlapping affair. But we also stated we were preparing for the alternate scenario, a pullback below last weeks floor;
• On the back of that bearish assumption, we constructed a chart showing, at one hand, a Fibonacci-tool anchored at 1.0290 to make sense of the declining price action with its shallow retracements from the US elections reaction high, as a means to come up with a tentative target in case the EUR/USD resumes its graceful downward trajectory;
• On the other hand, the chart shows a series of smaller ascending channel lines, from which the pair rolled over this morning. These lines provide the structure to increase our longs;
• Because today's price faltered at a former support around 1.0670 it makes the rally tepid as to qualify as a forced short squeeze. That situation would have brought back the EURUSD to 1.0800 very quickly;
• Traders are talking the short covering ahead of Italian vote was done on purpose amidst a sentiment which is, by the way, not burdened with the usual negativity we see in the euro. Note FXStreet's FXPoll ended the week with only 57% bearish views for the short-term (36% bulls, 7% sideways) on the EUR/USD.

 

 

 

Positions and Strategy:

• I'll be looking to increase longs as we correct upwards, but with a degree of realism: this trend may not end for some time and maybe we are not going to see major corrections. Therefore we are prepared to keep managing both long and short exposures as we go further down;
• The ideal setup would involve a correction to 1.0800. On the way up some of the short positions opened at 1.0768, 1.0766, 1.0754 would be liquidated while in profit, and some new longs opened with clear intraday closings above 1.0660, targeting 1.0850.
• But if we don't get that correction, we will increase the shorts with fresh lows in the exchange rate, stapeling shorts on all the way to 1.0290;
• A new buy at market was executed this morning at 1.0663, going into red from the start which pushed me to move the stop of another long in profit to break even (see b.e. in left table);
• We also closed a short from 1.0754 for 165.8 pips adding reaching 1967.9 pips on the short leg for November.

 

For more details on trade statistics and current exposure, please click here.