Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
The recent relief rally in EURUSD, while encouraging for some bulls, does not appear to be driven by fundamentals. Instead, the move seems entirely technical in nature as there has been no notable good news coming out of Europe lately. The EU is still far behind the United
States with Covid vaccinations, and consequently, the Eurozone’s economic recovery will lag behind that of the US. This is the main theme for the EURUSD pair at the moment and one that’s not likely to change for the several months to follow. From this perspective, therefore, the path of least resistance for EURUSD is still down.
EURUSD Reached the 1.20 Big Resistance Area
EURUSD practically reached “our” designated sell zone that we discussed here several times in recent weeks, which is the 1.20 BIG resistance area. Therefore, it’s no surprise that the rally is already showing signs of exhaustion here, potentially setting up a reversal.
Looking to sell on bearish signals or patterns at this 1.20 resistance area is likely to prove a good strategy. Do note, however, there is no need to rush with the entry as it’s still fairly possible that EURUSD will test levels above 1.20 before it collapses lower. The 1.1970 - 1.2050 range is the likely reversal zone in this specific case, with brief tests above 1.2050 also possible.
In such a scenario, EURUSD would rally above 1.20, and then will be rejected there, resulting in a return below 1.20. This would make an excellent bearish signal and will increase the probabilities that a short
trade will work well. Of course, things don’t always work according to the books in the market, but it’s one scenario to watch as a possibility. Indeed such fake breakouts are not a rare occurrence in the Fx market.
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If EURUSD indeed stops here and starts moving down, then a dip back below 1.19 is likely needed to reestablish the stronger bearish dynamics that can then take the pair to the 1.16 area. 1.19 is not a negligible support
zone. It is a confluence zone from the 200-day moving average and other technical factors. This is why it is our 1st target for a short trade.
The above setup would, of course, be canceled if EURUSD sustainably moves above the 1.1970 - 1.2050 zone and stays there.
EURUSD Fundamentals: Strong US data gives Fed more room to be hawkish than the ECB
The following two weeks will be crucial for the Fx market and the EURUSD pair in particular. This is because the ECB and Fed meetings take place. The ECB meets next Thursday, while the Fed
will convene on Wednesday the week after. Given the recent lull in the Fx market, I would expect these two events to provide enough fuel to break some ranges.
Considering where the relative growth fundamentals and vaccination campaigns are currently in the US and EU, the Fed should come out more hawkish than the ECB. US economic data has been heating up recently on all fronts, including inflation, employment, and retail
sales, as we saw earlier this week. The Fed should acknowledge the positive momentum in the economy and finally communicate some way forward on tightening policy. The ECB, on the other hand, is in no rush to think about withdrawing stimulus. This divergence between the Fed and ECB should support the US dollar and help to quickly drive EURUSD back below 1.19.
The risk for USD bulls surrounding the Fed meeting is if the Fed plays down the improvements in the economy and states that they have no plans for withdrawing stimulus. Such an outcome would likely be crashing for the dollar, but
it is an unlikely one.
Entry:
- Wait for a confirmed bearish reversal signal to occur at the 1.20 resistance zone (1.1970 - 1.2050 range), as described above.
Stop:
Targets:
- 1st: 1.19 moderate support zone
- 2nd: 1.16 weekly support area
Trade signals from the past week
- March 29, 2021 – Short Silver from $24.60 (in progress); trade idea sent on March 24
- April 8, 2021 – Short EURJPY from 129.95 on a break below 130.00 (in progress); trade idea sent on April 2
TOTAL: 0 pips profit in the past week
TOTAL: +3900 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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