Short-term Trading Idea FX EUR/USD – Bear Speculation: Development on Ideas from 26/10/15

Trading opportunities for currency pair: the euro/dollar’s candle has been closing with a long upward shade for six weeks in a row. The eurobulls aren’t able to strengthen above 1.15. The interim 1.0838 target is still there, with the support zone at 1.0807-1.0818 (27th May and 20th July minimums). A scenario where we’ll see growth will become frozen out for a while if the daily candle closes above 1.1210.

Background:

The last EUR/USD idea I made came out on 26th October. When I published the review, the price was at 1.1012. Following a break in the trend, I was expecting a rebound of the pair to around 1.1050 with a subsequent fall for the euro to 1.0807-1.0838.

The key event of last week was the FOMC meeting and at the end of which saw the euro/dollar down to 1.0896. Since the price didn’t reach the calculated targets and, after a 489 point fall from 1.1050, returned to 1.1071. I believe that in the end were without a loss. After a depart of the position to a five figure plus, I would have shifted the safety stops to the level at which the deal was opened in any case.

On Thursday the euro jumped as part of a correction and on Friday the sellers lost control of the situation. Due to weak stats, the USD lost all of Wednesday’s gained points.

As things are at the moment:

The price at the time this review is published is 1.1002. Compare this to Friday 24th October’s closing price of 1.1012 and it seems like last week didn’t take place. I’ve three graphs in this review (Monthly, Daily, euro/pound) because the situation is a little ambiguous. The euro didn’t manage to close above 1.1095. The monthly candle closed in a way which indicates a further fall for the euro against the dollar.

The main events of this week are: RBA interest rate decision; BoE minutes’ publication and Carney’s speech, US unemployment level and employment creation; Yellen speech’s. The main events for the rest of this year are the ECB meeting (4th December) and that of the FOMC (15-16th December).

What’s of interest at the moment?

Monthly

The monthly candle closed with a bearish body and a long shade. Pay attention to the fact that the euro/dollar has been closing with this kind of shade for six months now. The eurobulls can’t strengthen above 1.15 due to expectations that rates for deposits will be decreased and QE could possibly be extended by the ECB.

According to the oscillator stochastic, a sell signal has formed on the monthly. It’s not worth ignoring the bearish signal on the trend.

Daily

The EURUSD rose to 1.1071 on Friday. The buyers couldn’t keep the rate at this level though. Traders began fixing profit from the correctional movement before the weekend. The price has returned to 1.10.

In sum, a candle with a small shade and a long upper body formed. Any chance of a fall on the daily will freeze but will not be cancelled; any close of the day above 1.1095 would do the trick. Here we could be talking about a sideways, but I’m not going to consider this since I see a falling cycle for the euro since 20th November.

The interim target is 1.0838. The support zone is at 1.0807/1.0818 (27th May and 20th July minimums). As soon as this zone is passed, the road to 1.0520 (13/04/15 minimum) will open up.

EURGBP cross on the weekly

I’ve not just put the euro/pound cross in the review for the sake of it. Traders have been buying UK pounds for euros for the past three weeks in a row. After Draghi’s press conference, the euro’s fall hastened. Due to the fact that the euro renewed to 0.7492, it’s highly likely that there will be a break from 0.6935.

I wrote above that I have a falling euro/dollar cycle to 20th November, 2015. The next ECB meeting is on 4th December. We can’t rule out a fall of the euro to 0.6935.

The Bank of England is set to convene on Thursday and on Friday American labour market reports will be out. We need to keep our eyes and ears open to the NFP data and to what Carney has to say.