Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Various issues within the Eurozone, though of similar nature, drove safe-haven flows out of euros into Swiss francs over the past six months, as a result of which EURCHF stayed in a steady downtrend. The Corona Crisis precipitated the last of those setbacks as Eurozone countries failed to come up with a unified approach to dealing with the pandemic-caused economic shock.
The Swiss National Bank (SNB) has been buying the EURCHF pair for the whole time and managed to fight off a steeper decline. Switzerland's central bank will be pleased with the latest moves in the pair as EURCHF is finally making a notable push higher this week after some good news out of Europe.
Euro Moves Higher as EU Leaders Take Promising Steps to Aid the Economy
Last week's Franco-German proposal for a €500 billion aid, and the European Commission today unveiling a €750 billion economic recovery plan, was enough to get euro bulls excited. The single currency is making a run higher across the board on most Fx pairs.
However, it is still too early to call an end to EU existential fears and of the EUR downtrend. These proposals still have to get the backing of individual EU countries, and we know that there is strong opposition from frugal member states such as Austria and the Netherlands.
Nonetheless, more good news of this sort can push the EURUSD and EURCHF pairs higher, even if it's just rumors and proposals. For example, some of the opposing countries softening their stance will be an additional signal for euro bulls to bid the currency up.
The technicals can help us to make sense of the recent bounce and put it in the larger context. As you can see on the weekly chart below, a major resistance trendline stands in the 1.0750 price area. This trendline goes back to April 2018 when EURCHF peaked. So, calling a bottom in EURCHF here with such a significant resistance trendline standing only 100 pips higher from current levels would be premature.
A larger retracement has started, though, and that can take the price to this falling trendline to test the 1.0750 resistance area. The weekly RSI indicator is also turning up from oversold levels, confirming that the bearish leg has ended.
The 1.07 area, where EURCHF hit a wall today, is also a notable resistance. So, the pair may start a retracement to the downside here in what could turn out to be a larger bullish move.
As we said above, there is big weekly resistance at 1.0750, thus the risk-reward from current levels is not very attractive. But, if EURCHF retraces down in the next few days, the risk-reward could improve. In such a scenario, the 1.0600 price area would be particularly interesting to look for buying opportunities.
- Wait for the retracement to take EURCHF lower toward the 1.0600 - 1.0580 area;
- Look to enter long on buy signals in that area; Intraday charts will give early clues for a bullish turn
Stop loss:
- Place the stop below the entry pattern;
- Generally, EURCHF shouldn’t move below 1.0550 for a proper bullish continuation to materialize
Targets:
- 1st: 1.0700
- 2nd: The 1.0750 resistance area
Trade signals from the past week
- May 21 - Short EURUSD from 1.0955; first target reached at 1.0900 = +55 pips profit
TOTAL: +55 pips profit in the past week
TOTAL: +2725 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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