Policy divergence theme still dominating EURUSD

Technical Outlook:

 

• The momentum extension – 14-day RSI below 30, daily MACD on record lows for the year- has to be understood as an intensification of the dominant policy divergence theme: at one side the factoring in of a Fed rate hike in December, and on the other side, the anticipation that the ECB will not end or even reduce its QE program;
• With that implied probability of US interest rate hike, the US Dollar Index is sniffing around the 98,80s with three upper wicks on recent daily candles;
• Translated on a EURUSD chart, the USD strength called to live a new Fibo anchoring with projections at 1.0970- now resistance-, and further down at 1.0715 coincident with the spike low of January;
• Commodities recovering ground as seen on the S&P WCI and commdolls staging a base in last two days, might press the USD lower, but if not significant, the move may just be used to load more USD longs;
• CFTC data indicates steady building of EUR short speculative positions now at -93.5K maybe amplified from -85k 4 weeks ago maybe by a liquidation of the wrong footed longs when the EURUSD was above 1.11 . Note the EUR shows the biggest net short positioning followed by JPY and GBP.

 

Positions and Strategy:

• I used small retracements to offload euro shorts and bank some profits helping the balance grow, but in absense of up spikes shorts could not be rereloaded again, so entered short at market today at 1.0873
• At 1.0920 and 1.1089 are next short limits;
• The bespoke support (1.0715) is offering incentive to by and so a limit buy is now placed at 1.0731.
• For more potential support and resistance, see FXStreet's positioning indicator for EURUSD:

 

 

Trading Methodology:

The trading methodology is technical discretionary with strong enphasis on risk management: control of used and available margin, effective leverage, and position sizing. It is meant to capture the most amount of pips from the constant intraday price oscillations in the EUR/USD while keeping the floating draw down at bay. There is no use of stop loss orders for each trade, instead, the risk is managed as a whole, for the entire position.

Buy and sell trades are executed with two separate real accounts. The track record can be seen here.

Trades can be followed in real time through Twitter.

To learn more about the method, you can watch these special webinar series:
Exploring the Coast Line of Foreign Exchange Land - Part I
Exploring the Coast Line of Foreign Exchange Land - Part II