We’re down to the last trading days of the year! Before I leave you guys for a bit to crunch some numbers, here’s a day trade setup on EUR/USD that might interest you.
As you can see on the chart below, EUR/USD is having trouble breaking above the 1.0450 minor psychological area. This isn’t surprising since the level has served as resistance back in mid-December and it’s also currently lining up with the weekly open price and the 100 SMA.
Looking at the economic picture, it still makes sense to short the euro against the dollar. The Greenback has barely taken a breather since Trump won despite the uber-strong and overextended rally that we’ve been seeing for the past couple of weeks.
On the other side of the trade, forex bears don’t look like they will feel the love for the common currency anytime soon. For one thing, the euro barely reacted to the Italian Parliament’s decision to allot 20B EUR to bail out Italian banks. This is likely because the bailout is only the first among many tests to the EU’s new rules of requiring bond holders to take losses before taxpayer money would be tapped.
Meanwhile, Greece is still in hot water as the IMF continues to say “no thanks” to participating in its bailout fund. This puts more pressure on Germany to shoulder most of the bill, a notion that is increasingly unpalatable to German taxpayers and something that Merkel will definitely listen to ahead of the elections.
So, with not a lot of bulls stepping up, we just might see the euro’s downtrend extend until at least the end of the month. If you’re thinking the same thing, then shorting around current levels is already a good idea. However, if you prefer a more conservative entry, then you can also look at the 1.0500 major psychological handle, which is right at the falling channel resistance AND the 200 SMA on the chart.
What do you think? Will this setup be enough to make you enough pips before the week ends?
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.