EUR/USD trends slide through descending channels | May 13, 2019

EUR/USD trends slide through descending channels, minor trend takes channel support and major downtrend fails at resistance:

EURUSD  has formed the sloping channel in both minor and major trends (refer daily and monthly charts).

The bullish streaks are observed from 2-3 weeks in a row upon the test of channel support at 1.1109 levels.

Most importantly, the interim upswings are backed by both the momentum oscillators and by the trend indicator as well; the current prices are spiking above 7-DMAs that is most likely to extend further rallies certainly (refer daily chart ), however, it should not be deemed as a reversal of major downtrend which is still bearish .

In fact, we had raised caution for aggressive bulls in our previous post also.

The major downtrend has also been sliding through sloping channel, where bears retrace 61.8% Fibonacci levels from 2018 highs on the failure swings at channel resistance as both leading oscillators signal bearish momentum (refer monthly chart).

Steep slumps have gone below EMA levels and retraced more than 61.8% Fibonacci levels of January 2018 highs (i.e. 1.2612) and January 2017 lows (i.e. 1.0371 levels) (refer monthly chart).

Overall, although the current minor trend seems to be bullish , the major downtrend still remains intact as the current price on the monthly timeframe is well below 21-EMAs despite rallies in the short-run, bears are most likely to extend major downtrend and hit 2-year lows again.

We could foresee more slumps on cards over the coming months as both leading oscillators ( RSI and stochastic curves) and both trend indicators (EMAs & MACD ) have been signaling intensified bearish momentum and downtrend continuation respectively.

Trade tips: At spot reference: 1.1231 levels, contemplating above technical rationale, one can execute boundary strikes options strategy. Such exotic option with upper strikes at 1.1253 and lower strikes at 1.1208 (i.e. 7DMA levels) likely to fetch exponential yields than spot moves. By choosing this strategy, one can participate in the prevailing rallies but not disregard the major trend which is bearish .

Alternatively, shorting futures of mid-month tenors are advocated with a view of arresting further potential slumps. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 33 levels (which is mildly bullish ), while hourly USD spot index was at -14 (mildly bearish ) while articulating (at 07:01 GMT ).