Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
As we’ve said on multiple occasions in our weekly Fx editions, the EUR has rather unattractive fundamentals compared to other currencies among the Fx majors.
The ECB is one of the most dovish CBs, interest rates will remain negative, and the economy has not recovered as much as other western peers. Furthermore, the euro is not a safe haven, so it gets no help from the ongoing turmoils in stock markets, and it certainly is not helped by the ongoing tensions between Russia and Ukraine. All of this points to more downside risks for the EUR currency over the coming
weeks.
Rejection near 1.15 and break below 1.13 indicate bearish trend continuation
So, first things first, why shorting EURUSD looks like an attractive setup at the current juncture?
Looking at the technicals, the rejected upside attempt toward 1.15 (1.1482 actual high) followed by a break of the previous swing low (1.1271) is a bearish signal, particularly in the context in which it appeared.
Namely, the break of the 1.1270 lows suggests that the consolidative flag pattern is breaking to the downside. Moreover, the chances that the bearish breakout is genuine are now higher because the upper end toward 1.15 has already been tested and rejected.
In case of continuation to the downside after today’s Fed meeting, EURUSD may encounter some moderate support at the prior lows around 1.12 (1.1180 - 1.1230). However, it’s unlikely that these would hold once the bearish trend continuation is underway.
Given the event risk of the Fed meeting tonight, there are two primary ways to look for short entries:
- Wait and after the Fed meeting, then look for entries (perhaps at better levels if the market gives a chance). The risk with this approach is a hawkish Fed pushing EURUSD down and hence missing the opportunity
- Enter near current levels (1.1280) with a stop above 1.1370
- Or you can use a combination of the two approaches (split your position into smaller trades)
The 1.1370 resistance zone (see chart) should hold in either case. It may be challenged more seriously if the Fed disappoints tonight and EURUSD rebounds. But even in this scenario, there is only limited upside for EURUSD due to the overall bearish fundamentals discussed earlier.
Stop:
- Above the resistance zone at 1.1370
Target:
- 1.10 area; note that taking some profits along the way at round number levels such as 1.1150 and 1.1100 would still be a prudent strategy
In this context, the daily EURUSD chart from the weekly analysis (released this Monday) is worth a reminder. It shows the overall bearish trend since mid-2021 and the target toward 1.10 (see below).
Trade signals from the past weeks
- Waiting for entry on USDCAD trade; USDCAD broke higher last week driven by the broad risk aversion. It is now returned back to the 1.2560 technical zone for a retest ahead of today’s Bank of Canada and Fed meetings. Depending on the outcome of the two events, USDCAD could bounce from this 1.2560 zone or try to test deeper levels. See the full USDCAD trade idea that was sent last week (Jan 21).
TOTAL: 0 pips in the past week
TOTAL: +5075 pips profit since October 1, 2018
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High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
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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