EURUSD - Potentially, A Major Short Opportunity - Take 2 by DanV on TradingView.com
23 August 2020
Updates and comments
The earlier published chart suggesting short did not develop as the retracement bounce was still in progress see chart linked below (29th June). This now appears to be complete and therefore, I am republishing the idea with revised/adjust wave counts and associated details. I think it could offers even better level to short from with relatively lower risk.
Background: The current bearish cycle commenced in February 2018 and it is still intact and has some way to go. In the short term it had some very messy sharp up and down swings, however, it is very likely that it has resumed a longer term bearish trend – see previously published chart in January 2018 lined below.
Fundamentally, like most economies, Europe too has lots of cross currents which are likely to impact relative strength of EURO Vs USD, such as:
a. The fall out from the impact of Covid-19
b. Political differences within the bloc might become more pronounced.
c. In addition the Brexit negotiation which must conclude by end of Dec 2020 might not go well in the prevailing backdrop of negative social mood when disagreements are more likely.
Summary of some of the technical:
Monthly - From 1987 to Present
https://www.tradingview.com/x/D3Wn3LRO
Major Bullish cycle completed in February 2008. Since then it has been in clear bearish channel probably developing a triple zigzag in the form of WXYXZ. If correct then it might be about to commence 2nd intermediate zigzag with in wave "Z".
Monthly - From 2008 to present
https://www.tradingview.com/x/W5hWPq9j
Price has retraced 66.67% (2/3rd) of the decline from February 2018 to March 2020 low, hitting the resistance from declining channel line and horizontal structural area which has acted as support resistance several time in the past. 50 Period RSI at zero line.
Weekly - suggesting the retracement is likley complete at major level explained above and has posted a Key Reversal Candle. A follow through will help confirm a resumption of the bearish cycle.
https://www.tradingview.com/x/uxzb5fxi
Commitment of Traders ( COT ) Data
https://www.tradingview.com/x/c93kVL7r
That the Open Interest reached historically high level of 706,458 and as dis the commitments of the major players as follows:
Non Commercials (Large Speculators) are Net Long with 196,943 Vs Previous week's 199,751 &
Non Reportable (Small Speculators) are Net Long with 62,421 Vs Previous week's 56,510.
These data shows that bullish sentiments for EURUSD has reached relative extreme where trend change could develop.
Conclusion: Longer term bearish decline is anticipated. Use your own method of entry and trade management. Suggested entry could be upon:
1. A clear breakdown below 1.1700 which would help confirm the resumption of downtrend OR upon retracement towards 1.1850 with stops just above 1.20.
2. Initial downside target could be around 1.120 area and secondary target around 1.06.
3. Invalidation would be a close above 1.1200.
Caution: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
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Thank you for taking the time to read my analysis.
DanV