EURUSD Bearish Engulfing on Monthly Chart
EURUSD Bearish Engulfing
We sometimes need to take a step back, and look at the big picture... where we'd discover a EURUSD Bearish Engulfing on monthly chart. With the US elections coming up, how should an Invest Diva trade this naughty pair? Read on for Invest Diva's IDDA approach to strategy development.
Technical Analysis | EURUSD Bearish Engulfing
Long Term Analysis: After breaking below the Ichimoku cloud back in September 2014, the EUR/USD continued on a free fall for seven months. It then oufn its comfort zone between 1.06 and 1.15... And has been consolidating within this range ever since. If the range is bound to move forward, it is only a matter of time when we would see the pair back to 1.06 from its current price.
If you are an Invest Diva student, you probably are already in a bearish position for the pair. But when should you get out?
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Taking a close look at the monthly chart, you'd notice that in October the pair managed to form a perfect bearish engulfing pattern.
Being below the pivot level of 1.1025 and all, this could certainly be a signal that we could further pressure in the pair next month.
Unfortunately, next month is no ordinary one. The US elections results will be out on November 8th.
Short Term Analysis: The daily chart shows a bit more indecisiveness for EUR/USD. After the pair broke below the support of 1.09 on Monday, it has been spinning around just below it eversince. The volatility was especially high on Wednesday and Thursday. The bears ended Thursday's trading session right at the 61% Fibonacci level at 1.09.
Fundamentals | EURUSD Bearish Engulfing
EU Side:We had two major news out of the EU zone on Tuesday:
- German IFO Business Climate: 110.5 vs. 109.6 forecast, 109.5 previous
- European Central Bank President Mario Draghi defended the central bank's easy-money policies
So we had good news and bad news for Mr. Euro, which explains the market behavior.
US Side: While there are many other factors also impacting the US dollar (hello? Interest rates hike anticipation?) the market has certainly been swinging after each presidential debate. The swings shall continue in the next two weeks as more controversy comes into play.
Market Sentiment | EURUSD Bearish Engulfing
62% of traders are currently long the EUR/USD pair. The trading crowd has grown less net-long from yesterday but further long since last week. The combination of current sentiment and recent changes gives a further mixed trading bias.
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So we don't quite have the market sentiment behind our bearish scenario. At least for now.
Trading Strategy | EURUSD Bearish Engulfing
Let's take an IDDA approach for the EUR/USD traders before and after the US elections.
Short-Term: In the next two weeks, we may see a continued strength in the US dollar, unless there is a massive negative news out of the Clinton campaign. Depending on your risk tolerance, you could set your short-term bearish target at either 1.0850 or 1.0750. Try to get out before the Elections.
Election Day: There could be a Brexit-style volatility on the day of November 8 across the USD board. I would stay out of trading that day as it may contain too much risk.
Long-Term: A Trump Triumph could have yet another Brexit-Style impact on the USD, with it potentially dropping to new lows. That would pump the EUR/USD pair up back towards our pivots or even resistance levels. A Hillary victory could still have a bearish impact on the market, albeit less concerning and shorter-lived. With that, mega-long term investors with mega-high risk tolerance could remain in the bearish game for EUR/USD until it reaches 1.06 again.
Don't forget to sign-up to get information on my FREE WEBINAR on US Dollar Elections Analysis this Thursday.
Here are Invest Diva's calculations for important EURUSD approximate levels to keep an eye on:
|Support Levels||Turning Point||Resistance Levels|