EUR/USD Chartpack – Technicals, Trading & Hedging Setup

EURUSD short-term technicals are turning neutral to bullish. The pair has been attempting to bounce back from the recent past as the hammer patterns have taken-off rallies above 7 & 21-SMAs, as both leading & lagging indicators are in tandem with the uptrend (refer 2H chart).

The EUR looks soft and technically inclined for a little more strength in the short run. We spot crucial support levels at 1.1110 and 1.1095, for a upside potential towards 1.1144 and 1.1174 level, but be cautious about resistance is 1.1208 levels.

While the major downtrend has also been sliding through sloping channel, where bears retrace more than 61.8% Fibonacci levels (almost 78.6%) from 2018 highs on the failure swings at channel resistance, as both leading oscillators and lagging indicators still signal bearish momentum, the downtrend continuation seems to be most likely (refer monthly chart).

Shooting star pattern pops-up at peaks in the major trend, ever since then you could make out bears have shown their effects, steep slumps have gone below EMA levels and retraced more than 61.8% Fibonacci levels of January 2018 highs (i.e. 1.2612) and January 2017 lows (i.e. 1.0371 levels) (refer monthly chart) but from the last couple of months bulls have held firmly. 

Accordingly, we advocated directional positions for EURUSD couple of days ago, please refer below weblink for more reading on them:

https://www.econotimes.com/FxWirePro-EUR-USD-Directional-Hedges-As-Minor-Trend-Tests-Sloping-Channel-Support-Major-Trend-Fails-At-Channel-Resistance-1565964

We now continue to uphold the strategy on hedging grounds on the eve of New Year.

The Strategy: Contemplating above technical rationale, one can execute boundary options strategy. Such exotic option with upper strikes at 1.1144 and lower strikes at 1.1095 levels likely to fetch exponential yields than the spot moves.

At spot reference: 1.1124 levels, we recommend longs in EURUSD futures contracts of January’19 delivery, simultaneously, shorts in futures of Feruary’20 delivery for the major downtrend. The short leg is likely to hedge potential slumps and the momentary upside risks can be arrested by the long leg. Thereby, one could be able to directionally position in their FX exposures on hedging grounds.