EURUSD - Potentially A Major Shorting Opportunity
Updated
Background: The current bearish cycle commenced in February 2018 and it is still intact and has some way to go. In the short term it had some very messy sharp up and down swings, however, it is very likely that it has resumed a longer term bearish trend – see previously published chart in January 2018 lined below.
Fundamentally, like most economies, Europe too has lots of cross currents which are likely to impact relative strength of EURO Vs USD, such as:
a. The fall out from the impact of Covid-19
b. Political differences within the bloc might become more pronounced.
c. In addition the Brexit negotiation which must conclude by end of Dec 2020 might not go well in the prevailing backdrop of negative social mood when disagreements are more likely.
Summary of some of the technical:
1. Monthly - Please see chart below in the update
a. EURUSD topped in July 2008 and has been in clear bearish channel.
b. Since 16th February 2018, it is potentially developing a double zigzag of which the second zigzag probably commenced on 9th March 2020.
c. Since February 2018, the RSI has remained well below 50% on any attempts to rally.
d. If it forms similar price action to that in Sept 2000 – February 2002, then it might decline towards 1.000 (Parity).
2. Weekly - Please see chart below in the update
a. In the very choppy up and down moves from Dec 2019, the price has failed to overcome structural resistance around 1.150 in proximity of bearish 200 period weekly MA, whilst
forming a double top along with RSI remaining below 50%.
b. June spike high appear to have some time symmetry of high to high of 50 weekly bars.
3. Daily - Please see the main chart
a. A sharp decline from 9th March was retraced by 88.6% which is in proximity of 200 weekly MA and declining trend channel, whilst RSI remain below 60 (RSI range of 50 -60 is
considered bearish resistance zone).
b. A break below 1.1160 would help confirm the continuation of bearish trend and opportunity for a short entry with possible move towards 1.1 – 1.09 area and longer term towards
1.05.
4. Point & Figure Chart – Please see chart below in the update
Initially downside target of 1.103
5. COT Data – Please see chart below in the update
a. At the June high the Open Interest was much lower than that which accompanied the March spike high. Even though the price was not that far off. This suggests that during the
run up from May low, most of it was due to short covering.
b. Net long position by Non-Commercials (Large Speculators) and Non-Reportable (Small Speculators) are at relative extreme not seen since May 2018, which might have to cover on
price weakness. Their Net long positions are as follows:
i. Large Speculators Net long by 118,448
ii. And Small Speculators Net Long by 44,092
Conclusion: Longer term bearish breakdown of the consolidation is anticipated. Use your own method of entry and trade management. Suggested entry could be upon:
1. A clear breakdown below 1.1160 would help confirm the resumption of downtrend and offer short entry.
2. Initial downside target could be around 1.1 – 1.09 area and secondary target around 1.06
3. Invalidation would be a close above 1.140 and more specifically 1.150
Caution: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciate my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then, please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Fundamentally, like most economies, Europe too has lots of cross currents which are likely to impact relative strength of EURO Vs USD, such as:
a. The fall out from the impact of Covid-19
b. Political differences within the bloc might become more pronounced.
c. In addition the Brexit negotiation which must conclude by end of Dec 2020 might not go well in the prevailing backdrop of negative social mood when disagreements are more likely.
Summary of some of the technical:
1. Monthly - Please see chart below in the update
a. EURUSD topped in July 2008 and has been in clear bearish channel.
b. Since 16th February 2018, it is potentially developing a double zigzag of which the second zigzag probably commenced on 9th March 2020.
c. Since February 2018, the RSI has remained well below 50% on any attempts to rally.
d. If it forms similar price action to that in Sept 2000 – February 2002, then it might decline towards 1.000 (Parity).
2. Weekly - Please see chart below in the update
a. In the very choppy up and down moves from Dec 2019, the price has failed to overcome structural resistance around 1.150 in proximity of bearish 200 period weekly MA, whilst
forming a double top along with RSI remaining below 50%.
b. June spike high appear to have some time symmetry of high to high of 50 weekly bars.
3. Daily - Please see the main chart
a. A sharp decline from 9th March was retraced by 88.6% which is in proximity of 200 weekly MA and declining trend channel, whilst RSI remain below 60 (RSI range of 50 -60 is
considered bearish resistance zone).
b. A break below 1.1160 would help confirm the continuation of bearish trend and opportunity for a short entry with possible move towards 1.1 – 1.09 area and longer term towards
1.05.
4. Point & Figure Chart – Please see chart below in the update
Initially downside target of 1.103
5. COT Data – Please see chart below in the update
a. At the June high the Open Interest was much lower than that which accompanied the March spike high. Even though the price was not that far off. This suggests that during the
run up from May low, most of it was due to short covering.
b. Net long position by Non-Commercials (Large Speculators) and Non-Reportable (Small Speculators) are at relative extreme not seen since May 2018, which might have to cover on
price weakness. Their Net long positions are as follows:
i. Large Speculators Net long by 118,448
ii. And Small Speculators Net Long by 44,092
Conclusion: Longer term bearish breakdown of the consolidation is anticipated. Use your own method of entry and trade management. Suggested entry could be upon:
1. A clear breakdown below 1.1160 would help confirm the resumption of downtrend and offer short entry.
2. Initial downside target could be around 1.1 – 1.09 area and secondary target around 1.06
3. Invalidation would be a close above 1.140 and more specifically 1.150
Caution: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciate my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then, please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Note
Monthly - Weekly -
P&F Chart – Initial downside target could be 1.03
COT -
Note
Lot of the background details shown above still holds even though the price has retraced more than originally anticipated. However, this could give a better short entry. Breakdown below 1.15 would confirm and stop can be little above this weeks high. Also 23rd July top looks interesting as there was also 23rd June intermediate top. Here is the chart
I will republish this over the weekend with updated details.
Note
As mentioned above here I have republished this idea with updated details
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