EURUSD Potential Shorts (Technical Analysis)Overall Context:
The dollar's been flexing its muscles lately, and EURUSD is feeling the pressure. We saw some crazy gaps when the markets opened on Monday morning – a sign of shaky liquidity, which usually snaps back. But with the trade war rumbling on, who knows?
As traders, we've got to stay prepared, expecting a correction but ready with our contingency plans if it doesn't happen. Let's dive in -
Technical Outlook:
Failure of the previous accumulation cycle - Classic Wyckoff stuff, cycles run their course.
A re-distribution is likely on the horizon, especially if the lower timeframes agree with the bigger picture. (Fractally, we need to see the LTF accumulation fail and for distribution to align with the HTF sentiment and cycle).
Price has broken to the downside and has created multiple lower highs.
Trading below the 200 EMA and has recently tested and bounced of the 50 EMA (at a correlating level of supply)
Keep in mind that USDJPY and EURUSD are inversely correlated and are currently in line - While the inverse correlation is a significant factor, it's not the only thing that influences these currency pairs. Interest rates, economic data, and global events can also play a role and we know how that story looks at present so this is just additional confluence for us.
Potential Scenarios & Probabilities:
Scenario 1 (High Probability) - Price will pull back into the supply and drop from there.
Scenario 2 (Medium Probability) - Price will continue to plummet and break structure to the downside.
Trading Considerations:
If price fills the gap and reaches supply levels above, you should wait for bearish confirmations to get involved.
If price drops past the previous low, identify new levels of supply and trade accordingly. (I'll try to post an update if this happens).
Final Notes:
Strong technical picture but this week has a lot of upcoming economic events (NFP, anyone?).
With the Tariffs imposed so close to the NFP release one can only assume there will be a power play by the Trump administration which we may not see coming.
All we can do for now is follow the money flow to stay in the know!
Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. Trading involves substantial risk and may not be suitable for all investors. Conduct your own research and consult with a financial advisor before making any investment decisions.
OANDA:EURUSD TVC:DXY FX:USDJPY
