USDEUR trade ideas
EURUSD below its 4H MA50 signals more selling.The EURUSD pair broke last Wednesday below its 4H MA50 for the first time since the start of April and is now consolidating under it. Within its 3-month Channel Up, this has always been a signal of more downtrend to come as it was technically halfway through the Bearish Legs of the pattern.
Given that the 4H MA200 (orange trend-line) is the medium-term Support, our Target is at 1.12500, just above the Internal Higher Lows trend-line. Check also the 4H RSI sequences between these 3 Bearish Legs. It is exactly ranging between the levels it did half-way through those Legs.
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What Is SMT Divergence, and How Can You Use It in Trading?What Is SMT Divergence, and How Can You Use It in Trading?
SMT divergence, or Smart Money Technique divergence, is a concept used by traders to analyse imbalances in correlated markets. By identifying when price movements deviate between related instruments, traders can uncover potential shifts in market momentum, often linked to institutional activity. This article explores what SMT divergence is, how SMT divergence trading works, and its practical applications.
What Is SMT Divergence?
SMT divergence, short for Smart Money Technique divergence, refers to a specific type of price discrepancy between two correlated financial instruments. Part of the Inner Circle Trader (ICT) methodology, this divergence is often interpreted as a sign of institutional or "smart money" activity, as it highlights potential inefficiencies or imbalances in the market.
Here’s how an ICT SMT divergence works: correlated instruments—like EUR/USD and GBP/USD in forex, or major stock indices like the S&P 500 and NASDAQ—typically move in the same direction under normal market conditions. SMT divergence occurs when one instrument makes a higher high or lower low, while the other fails to follow suit. This inconsistency suggests that buying or selling pressure may be uneven across these markets, often caused by larger market participants adjusting their positions.
For example, if EUR/USD forms a new high, while GBP/USD lags behind and fails to break its previous high. This divergence could indicate waning momentum in one pair, hinting at a potential reversal or shift in the overall market structure. Traders analysing SMT divergence often see these moments as key opportunities to assess whether institutional players might be involved.
To identify an SMT divergence, you can monitor two correlated assets’ charts and observe discrepancies. Also, there are SMT divergence indicators for MT4, MT5, and TradingView available online that can automate the process.
The Core Components of SMT Divergence
SMT divergence relies on three key components: correlated instruments, divergence between price movements, and the involvement of institutional players. Understanding these elements is crucial for applying this concept.
1. Correlated Instruments
At the heart of SMT divergence is the relationship between correlated markets. These are instruments that typically move in tandem due to shared economic drivers. For instance, in forex, pairs like EUR/USD and GBP/USD often exhibit similar trends because they’re influenced by the strength of the US dollar, as well as their close regional ties and trade relationships. In equities, indices like the Nasdaq 100 and S&P 500 often align because they reflect broader market sentiment and contain overlapping stocks.
2. Divergence in Price Movements
The divergence occurs when these typically correlated instruments fail to move in sync. For example, one instrument may reach a higher high, while the other stalls or even reverses. This mismatch is more than just noise—it can signal a deeper imbalance in the market, often linked to uneven supply and demand dynamics. It’s these price discrepancies that traders scrutinise to identify potential turning points.
3. Institutional Activity
One of the reasons SMT divergence is so closely watched is its potential link to smart money behaviour. Institutions often use correlated instruments to mask their actions, creating subtle imbalances that only become apparent through careful analysis. For instance, when one correlated pair lags, it might reflect deliberate accumulation or distribution by larger players.
How Traders Analyse SMT Divergence
Analysing SMT divergence helps in understanding the nuanced relationship between correlated instruments and interpreting these imbalances correctly. Unlike leading correlations—such as oil influencing the Canadian dollar—SMT divergence doesn’t rely on one asset consistently driving the other. Instead, it focuses on shifts in momentum where neither instrument is the leader, but their combined behaviour hints at potential market moves.
Identifying Divergence
Traders start by observing price action in two correlated instruments or timeframes. SMT divergence becomes apparent when one instrument forms a higher high or lower low, while the other fails to do so. For example, if EUR/USD makes a higher high, but GBP/USD stalls below its previous peak, this inconsistency could signal fading bullish momentum in the broader market. The key is that neither asset leads; instead, the divergence itself provides the signal.
Some common correlations traders use include:
- Forex Pairs:
EUR/USD and GBP/USD
USD/JPY and USD/CHF
DXY and USD/CAD
- Cryptocurrencies*:
BTC/USD and ETH/USD
- Equity Indices:
S&P 500 and NASDAQ
FTSE 100 and DAX
- Treasuries:
US 10-Year Treasury Yield and USD/JPY
- Commodities:
Brent Crude and WTI Crude Oil
Interpreting Divergence at Extremes
SMT divergence is particularly significant when it occurs at market highs or lows. When divergence appears at highs—such as one instrument making a higher high while the other fails—it often signals a potential bearish reversal in the stronger instrument. Conversely, at lows, if one makes a lower low while the other holds firm, it may indicate a potential bullish reversal in the weaker one. This imbalance highlights where momentum might shift.
Adding Context
Traders rarely rely on an SMT divergence strategy alone. They often look for supporting evidence, such as volume analysis, market structure shifts, or order flow data, to confirm the signal. For instance, divergence combined with signs of institutional selling near a high could strengthen the case for a bearish move.
SMT Divergence in Different Market Conditions
SMT divergence behaves differently depending on market conditions, offering traders insights that vary between trending and ranging environments. Its effectiveness hinges on the context in which it appears, so understanding how it adapts to different scenarios is key.
Trending Markets
In trending markets, SMT divergence often signals potential reversals or pauses in momentum. For example, in a strong uptrend, divergence at a new high (where one correlated instrument makes a higher high while the other does not) can indicate waning buying pressure. This inconsistency might suggest that institutional players are beginning to reduce their positions or shift market direction.
A similar principle applies in downtrends: divergence at a fresh low, where one instrument breaks lower while the other doesn’t, could signal that bearish momentum is losing steam. Traders often use these moments to reassess their analysis and consider the possibility of a reversal or pullback within the trend.
Ranging Markets
In a range-bound environment, SMT divergence takes on a different role. Rather than hinting at trend reversals, it often highlights potential breakouts or false moves. For instance, during a consolidation phase, if one correlated instrument makes a sharp move outside the range while the other stays contained, it may signal that the breakout is unsustainable and a reversal back into the range is likely.
Alternatively, if both instruments diverge significantly at the edges of the range, it could suggest that smart money is accumulating or distributing positions in preparation for a breakout.
Different Asset Classes
SMT divergence isn’t limited to one market type. In forex, it often reveals imbalances caused by macroeconomic drivers like central bank policies. In equities, it can signal sector rotation or institutional adjustments. Commodities, particularly oil or gold, may show divergence influenced by supply and demand dynamics.
Limitations and Common Misconceptions
While SMT divergence is a powerful tool for analysing market imbalances, it’s important to understand its limitations and avoid common misconceptions. Misinterpreting divergence can lead to flawed decisions, especially if it’s viewed in isolation or without proper context.
Limitations
- False Signals: Not all divergences indicate institutional activity or meaningful shifts in the market. Low liquidity or erratic price movements can create divergence that doesn’t hold significance.
- Context Dependency: SMT divergence requires a solid understanding of market conditions. Its reliability decreases in highly volatile or choppy environments where correlations break down temporarily.
- Not a Standalone Tool: Relying solely on SMT divergence can be risky. Traders use it alongside other forms of analysis, such as market structure or volume data.
Common Misconceptions
- Always Linked to Institutional Activity: Not every instance of SMT divergence involves smart money. Divergences can also result from retail trading activity or macroeconomic events.
- Predicting Market Direction: SMT divergence doesn’t guarantee outcomes; it highlights imbalances. Further analysis is needed to evaluate whether the market will reverse, continue, or consolidate.
- Universal Applicability: While it works across various markets, not all instruments are equally suitable for SMT divergence due to differences in liquidity or drivers.
Practical Applications of SMT Divergence
SMT divergence is a versatile analytical method that traders use to refine their strategies and deepen their understanding of market dynamics. Here’s how it’s typically applied in practice:
Identifying Market Turning Points
One of the most common uses of SMT divergence is spotting potential reversals. When divergence appears at key highs or lows, it often signals that momentum is shifting. When combined with other common trading tools, such as support and resistance, as well as ICT methodology concepts like order blocks and fair value gaps, this can be used to time entries or adjust risk exposure.
Potentially Enhancing Risk Management
SMT divergence can potentially enhance risk management by offering early warnings about changes in market conditions. If divergence aligns with other factors—such as weakening volume or significant resistance/support levels—it can serve as a signal to tighten stops or reduce position sizes, depending on the trader’s broader approach.
At the same time, it can also provide clear boundaries for setting stop losses. If a trader has confidence that a reversal in one asset is likely due to an SMT divergence, then a stop loss can be placed immediately after the maximum or minimum of the divergence.
The Bottom Line
The SMT divergence is a valuable tool for understanding market imbalances and spotting potential turning points. By combining it with other analysis methods, traders can gain deeper insights into price action.
FAQ
What Does Divergence Mean in Trading?
Divergence in trading refers to a mismatch between the price action of an asset and a technical indicator or between two correlated instruments. It often signals a potential change in trend, as the imbalance suggests a shift in market momentum.
What Is SMT in Trading?
SMT in trading stands for Smart Money Technique. SMT divergence is one of the ICT trading concepts. It focuses on identifying market imbalances that may reflect the activity of institutional traders, seen through divergence between correlated instruments.
What Does SMT Divergence Mean?
The SMT divergence meaning refers to an occasion when two correlated instruments fail to move in sync. One can make a higher high while the other does not or one can make a lower low while the other doesn’t. This indicates potential smart money involvement and signals a possible trend shift.
What Is an Example of SMT Divergence?
A common example is in forex, where EUR/USD forms a higher high, but GBP/USD does not. This divergence could suggest fading bullish momentum, signalling a possible reversal in EUR/USD.
What Is the Strongest Divergence Indicator?
While SMT divergence itself is powerful, traders often combine it with indicators like RSI or volume profiles for added confirmation. The strongest signals come from divergence paired with a broader market context.
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EUR/USD: Possible Fall Ahead? Let's See! (READ THE CAPTION)Upon reviewing the EUR/USD chart on the 3-day timeframe, we can see that following a sharp decline in the Dollar Index (DXY), the pair experienced a bullish move, reaching the 1.15 supply zone. If the price manages to stabilize and close below the 1.15–1.17 area, we can anticipate a further drop in EUR/USD to fill the created Liquidity Void (LV). This analysis will be updated accordingly.
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EURUSD SHORT FORECAST Q2 W18 D30 Y25EURUSD SHORT FORECAST Q2 W18 D30 Y25
Professional Risk Managers👋
Welcome back to another FRGNT chart update📈
Diving into some Forex setups using predominantly higher time frame order blocks alongside confirmation breaks of structure.
Let’s see what price action is telling us today!
💡Here are some trade confluences📝
✅Weekly order block rejection
✅Daily order block rejection
✅Intraday 15' order blocks
✅Tokyo ranges to be filled
🔑 Remember, to participate in trading comes always with a degree of risk, therefore as professional risk managers it remains vital that we stick to our risk management plan as well as our trading strategies.
📈The rest, we leave to the balance of probabilities.
💡Fail to plan. Plan to fail.
🏆It has always been that simple.
❤️Good luck with your trading journey, I shall see you at the very top.
🎯Trade consistent, FRGNT X
EUR-USD Swing Long! Buy!
Hello,Traders!
EUR-USD is trading in an
Uptrend and the pair is
Making a bearish correction
So after it hits the horizontal
Support area around 1.1280
We will be expecting a
Bullish move up on Monday
Buy!
Comment and subscribe to help us grow!
Check out other forecasts below too!
Disclosure: I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analysis.
Bigger correction down for EUHi traders,
My outlook last week of EU played out exactly as I've said! Just check my outlook of last week for proof.
Wave 4 became a Triangle and after it finished, it went up again for the last wave 5 into the Daily FVG.
After that it rejected and started the bigger correction down.
Next week we could see some consolidation and another wave down into the Weekly/ Daily FVG.
Let's see what the market does and react.
Trade idea: Wait for a change in orderflow to bearish, a small impulse wave down and a correction up on a lower timeframe to trade shorts into the Weekly/ Daily FVG.
If you want to learn more about trading with FVG's, liquidity sweeps and Wave analysis, then make sure to follow me.
This shared post is only my point of view on what could be the next move in this pair based on my technical analysis.
Don't be emotional, just trade your plan!
Eduwave
EURUSD retracementEURUSD continues to move sideways above 1,1300, lacking the strength for a new upward push.
This suggests we could see the correction extend towards the next support levels.
These levels are identified using Fibonacci retracement and previous highs, and are at 1,1253, 1,1183, and 1,1055.
Watch for a continuation of the correction and market reaction.
Important USD news is expected this week on Wednesday and Friday at 3:30 pm!
EURUSD Elliott Wave: EUR Trend is MatureThe rally for EURUSD has been spectacular.
The uptrend is nearing its point of exhaustion, if it already hasn't seen the top.
We've anticipated a large uptrend since the trend change in January.
There are 2 colored labels on the chart, red and black labels.
RED AND BLACK WAVE COUNTS
The RED labels imply a high in wave 1 and EURUSD is declining in wave 2. Wave 2 likely stretches down to 1.07-1.12 and may take 1 to 3 months to develop.
The market geometry within this rally fit really well on the red. However, the lack of RSI divergence at the end of wave 1 is a little worrisome. Typically, we'll see wave ((v)) diverge on RSI relative to the high of wave ((iii)).
The black is a slight variation of the red. BLACK suggests the recent high wave wave ((iii)). A little more dip and correction is wave ((iv)). Then, one more rally in ((v)) to finalize the larger degree wave 1.
Either way, the trends in EURUSD are skewing to the downside.
Since wave 2 is a corrective wave, it'll be a difficult one to trade. If you want to trade USD strength, consider buying USDCAD or shorting AUDUSD.
From lower levels (1.07-1.12) in about 1-3 months, a bullish setup in EURUSD and GBPUSD are likely to emerge for another powerful run.
EURUSD SHORT TRADE IDEA.This chart shows a bearish trade setup for the EUR/USD currency pair on the 30-minute timeframe. Here's a breakdown of the analysis and key elements:
Key Zones and Labels:
Entry Zone:
A highlighted zone between 1.13838 and 1.13979. This is where the trader anticipates entering a short (sell) position, expecting a reversal to the downside.
Stop Loss Zone:
The above the entry zone, with a clear stop loss level marked around 1.14180. This protects against further upward movement if the market does not reverse.
Target Zone (Take Profit):
The area, targeting a significant drop in price down to 1.12928 (with a mid-point around 1.13176). This indicates a favorable risk-to-reward ratio.
Expected Movement:
The chart suggests that the price may rise slightly into the entry zone, then reverse sharply downwards toward the take profit target.
From the entry zone → sharp decline → target at 1.12928
EUR/USD Bullish Breakout Trade Setup – Targeting 1.18089Entry Point: 1.13860
Stop Loss Zone: 1.13642 to 1.12578
Resistance Point: 1.14320
Target (TP) Point: 1.18089
🔍 Observations
Support Zone: Marked in purple near the entry and stop-loss area, suggesting a strong demand zone.
Resistance Zone: Around 1.14320, indicating a potential breakout level.
Trend: Short-term uptrend after a consolidation range.
Risk/Reward Ratio: Quite favorable, targeting a move of approximately 470+ pips (4.20% gain) from entry to target.
📊 Technical Indicators
Moving Averages:
Red (likely 20 EMA): Price recently crossed above, showing bullish momentum.
Blue (likely 50 or 200 EMA): Serving as dynamic support.
Price Action: Formation suggests a potential breakout from resistance toward the 1.18 target.
🧠 Conclusion
This is a long (buy) setup expecting a bullish breakout:
Buy entry above the support zone.
Stop-loss placed below major support (1.12578).
Target set significantly higher, aligning with prior structure or resistance at 1.18089
DeGRAM | EURUSD Declining From the Supply Zone📊 Technical Analysis
● EUR/USD stays below the broken resistance line.
● While under $1.144, the chart favors a slide to 1.131 → 1.12.
💡 Fundamental Analysis
● U.S. yields remain elevated, supporting the dollar.
✨ Summary
Stalling Euro-area growth and firm U.S. yields reinforce the technical breakdown. A daily close below 1.131 should accelerate the decline towards 1.12.
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EURUSD: Small bounce followed by a strong sell-off.EURUSD is bullish on its 1D technical outlook (RSI = 59.681, MACD = 0.0130, ADX = 48.626) but has turned sideways since the April 21st High with the 1D RSI getting rejected on March's Resistance back to the HL trendline. As you see this is roughly the same pattern as August 2024. After the RSI hit the HL trendline it pushed the price upwards back to the recent High only to get rejected heavily to the S1 level. Consequently, we are waiting for that rejection to be confirmed and take the short to the March 26th S1 level (TP = 1.07500).
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EURUSD💡Chart analysis of the EUR/USD currency pair (4-hour timeframe). Broken Wedge Pattern: The pattern has been broken to the downside, indicating the beginning of a negative trend reversal. 4-Hour Bearish Correction: The price is currently moving within a small ascending (corrective) channel, a corrective signal within a downtrend.
Next Expectation: A break below the current ascending channel could lead to a continued decline. Current MACD Indicator: The indicator is showing small green bars, indicating weak upward momentum and an upward correction within the overall downtrend, as shown in the chart.
⛔Not investment advice. For educational purposes only.
EURUSD - I Have A Lot Of Faith In Euro This Week!Euro is showing signs of weakness, failing to close above the 1.15123 higher timeframe PD array leaving EURO in limbo between two higher timeframe PD arrays; the 3-month IFVG and1 week SIBI.
I am exploring opportunities to the downside going into next weeks trading with 1.13080 being the 1st point of interest.
1.08814 - 1.11464 nearby BISI is a price range i have my eyes on also.
Bearish Movement loading As we look on 4H time frame we've been having bullish movement but for this week we might go bearish because we had shift of structure below the resistance and we looking forward to break below that support and get retest then we continue moving bearish
Entry:1.12690
TP:1.03537
EUR/USD: Is the Uptrend Losing Steam?EUR/USD has had an exceptionally strong month, gaining over 7% from bottom to top – one of the best performances in EUR’s history against the dollar.
But now, things are starting to shift.
🧭 Possible Long-Term Trend Change?
Beyond the impressive rally, the bigger story might be the potential shift in the long-term trend. However, after such a sharp move up, a correction is not only likely – it may already be underway.
🔍 Technical Outlook:
- Price pushed above the key 1.15 psychological level but failed to hold momentum.
- A bearish consolidation is forming.
- A classic Head and Shoulders pattern appears to be developing, with a neckline near 1.13.
- A break of that level could open the door for a deeper retracement, with a target around 1.11.
🛠️ Trading Plan:
I’m looking to sell rallies, ideally near 1.1450, to maintain a 1:3 risk-to-reward ratio.
Disclosure: I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analyses and educational articles.
Bearish drop?EUR/USD is reacting off the resistance level which is a pullback resistance that lines up with the 50% Fibonacci retracement and could drop from this level to our take profit.
Entry: 1.1427
Why we like it:
There is a pullback resistance level that lines up with the 50% Fibonacci retracement.
Stop loss: 1.1560
Why we like it:
There is a pullback resistance level.
Take profit: 1.1278
Why we like it:
There is a pullback support level.
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Could the price reverse from here?The Fiber (EUR/USD) is rising towards the pivot and could reverse to the 1st support.
Pivot: 1.1421
1st Support: 1.1141
1st Resistance: 1/1459
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