EUR/USD Chartpack - Technicals & Trade Setup | January 30, 2019

EUR/USD bullish engulfing counters shooting star , 21-EMAs to develop sloping channel in major trend – Trade strangles and directional hedge:

As shown in both daily and monthly plotting of  EURUSD , bearish patterns, such as shooting star , hanging man and engulfing candles backed by both momentum and trend indicators plummet price below DMAs and EMAs respectively, and prolongs range-bounded minor trend in the near terms.

EURUSD after testing the bottoms of slumps at 1.1289 and the strong support region at 1.13 levels, the price has been constantly spiking as highs as 1.1450 levels.

In this process, the pair forms bullish engulfing candle at 1.1405 level to counter previous selling sentiment. Consequently, bulls have managed to take-off rallies above 7 & 21-DMAs.

We reiterate that interim upswings, for today, are coupled with technical indicators also, have more upside traction, the ongoing rallies likely to prolong further but should see range resistance at 1.15 levels.

For now, we still remain in the range despite prevailing rallies, while under 1.1500, on the contrary, any eventual test and break of the 1.1393 may head back towards 1.1215 lows.

On a broader perspective, the major downtrend develops descending channel pattern as you could observe sloping channel pattern, retraces more than 50% Fibonacci levels from 2018 highs on failure swings at the channel resistance as both leading oscillators signal intensified bearish momentum. Both RSI and stochastic curves on both daily and monthly timeframes, show downward convergence to the prevailing price dips to signal strength and selling momentum.

While EMA and MACD bearish crossovers, on this timeframe, have also indicated downtrend to prolong further.

All these technical factors substantiate our stance on the levels around 1.12-1.10 is perceived as the most likely event and a major support region in the medium terms. The ideal area for a long-term higher low over the 1.0340 lows set in 2016. Notable supports within this region lie at 1.1190 and 1.1000.

Trade tips: At spot reference: 1.1440 levels, contemplating above technical rationale, one can execute 1w strangle short strategy with upper strikes at 1.15 and lower strikes at 1.13 levels. This has been an unbiased strategy but to favor slightly the bearish sentiments. Trade is most likely to derive returns as long as the underlying spot remains between these two strikes on the expiration.

Alternatively, we advocate initiating longs in EURUSD futures contracts of Feb’19 delivery as further upside risks are foreseen in near terms. Simultaneously, shorts in futures of April’19 delivery. Thereby, one can directionally position their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 96 levels (which is bullish ), while hourly USD spot index was at -70 ( bearish ) while articulating (at 05:48 GMT ).