Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
EURUSD smashed through the 1.20 psychological barrier last week and is now consolidating near 1.21, heading into the ECB meeting tomorrow. The overall uptrend on higher timeframes looks robust here, with few obstacles in the way toward 1.25.
Yet, some remaining dollar bulls hope that the ECB can turn this trend around, at least in the short-term. While there is a possibility for a reversal — if the ECB over-delivers — the probabilities for that to happen look relatively low. And that is because of the strong underlying fundamentals that are driving the trend. Mainly those are based on optimistic global growth outlooks driven by the successful development of COVID-19 vaccines and Biden winning
the US Presidential election. These game-changing events happened in recent weeks, hence the moves we are seeing in EURUSD and across markets.
The ECB will be dovish but don’t hope for a reversal below 1.20
The ECB will try to be as dovish as possible at the meeting tomorrow. Consensus expectations are for a 500 billion euros increase in PEPP QE and no overt interventionist comments on the recent appreciation in the EURUSD exchange rate. The markets expect no rate cuts, which if the ECB delivers can be a big dovish surprise that may send EURUSD on a deeper pullback, possibly below 1.20. But even that is unlikely to be
enough to reverse the longer-term uptrend that is in force here.
Therefore, the best strategy around the ECB meeting would be to look for buyable dips, where you can establish long EURUSD positions. Below, we take a look at the technical situation and which may be the best levels for that.
The 1.2050 price zone is strong support in EURUSD
Here we can see EURUSD consolidating after the stellar bull run last week. The chart suggests there is scope for the consolidation to last some more and maybe take another down leg with a lower low. That could come — surprise, surprise, right around the time of the ECB meeting.
On the 4-hour chart below, we can see the bullish channel with EURUSD retracing after hitting the mid-line resistance of the channel. Its support line comes around the 1.2050 level. Furthermore, this level is also where the support line of the retracement channel adjoins. Finally, the 38.2% Fibonacci retracement (of the 1.18 - 1.2177 bullish leg) stands slightly lower, at 1.2030. So, this area around 1.2050 is strong support in EURUSD and, therefore, likely a good place to look for buying opportunities.
“What if 1.2050 is broken?” you ask. In that case, the next major support area lower that I am looking at is 1.1940 - 1.1960. This is a Fibonacci confluence zone of the 38.2% and the 61.8% retracements of the two bullish legs that lasted between November 4 and December 4 (see chart below).
Entry:
- Look to enter on dips toward 1.2050
Stop:
Target:
- 1st - toward the 1.22 level
- 2nd - toward the 1.23 level
Trade signals from the past week
- December 7, Long GBPUSD from 1.3375 with target toward 1.38 (in progress)
TOTAL: N/A in the past week
TOTAL: +3160 pips profit since October 1, 2018
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Thank you!
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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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