Short EUR/USD Below the 50 SMA
EUR/USD has been on a strong bearish trend in the last two weeks, losing around 350 pips. The reason for this decline has been the market sentiment which has turned negative over worries that the Italian deficit for next year’s budget might get rejected by the EU or might even hurt the Italian economy if it goes through.
But, Italian politicians tried to convince the market yesterday that next year’s budget will help the economy grow faster, thus reducing the deficit. They have tried to do the same during the last two weeks but without much success. Yesterday, they had quite an impact and the sentiment improved somewhat, sending EUR/USD 80 pips higher.
But, we are seeing this move higher as an opportunity to go short on EUR/USD. The chart pattern in the H4 time frame today is similar to previous retraces that took place last week. All retraces higher last week provided a good opportunity to go short, so we are taking this opportunity today.
The stochastic indicator is overbought which means that the retrace is complete and above our heads we have the 50 SMA looming. If the buyers decide to push further up, then this moving average is likely to provide some decent resistance, so here we are. The signal looks good so far, but let’s give it time.
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