Trading EUR/USD
- Lester Davids
- 12 minutes ago
- 8 min read
Research Notes December 2025 > https://www.unum.capital/post/rdec2025
Trade Local & Global Financial Markets with Unum Capital.
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EURUSD (Euro / U.S. Dollar) - DAILY
Highlights: Euro / U.S. Dollar
Momentum Climax: The daily momentum profile is flashing a rare "maximum velocity" signal. Both the Ultra Short Term and Short Term indicators are effectively "pegged" at their mathematical ceilings in the "Extreme Overbought" tier. While this confirms massive buyer dominance, statistically, readings at this limit invariably force a pause or mean-reversion event as the market runs out of aggressive buyers at these immediate prices.
Trend Acceleration: The trend has shifted gears from "steady accumulation" to "impulsive breakout." The Mid Term (7-Day) trend has surged into the "High Bullish Momentum" tier, confirming that the rally has broadened beyond just day-traders to include swing-trading desks.
Structural Strength: Crucially, the 14-Day Base Term trend is healthy and rising in the "Strong" tier. It is not yet into the "Overbought" zone, which suggests that while the short-term is overheated, the medium-term uptrend has significant runway remaining before reaching structural exhaustion.
Breakout Zone: The pair is pushing into blue-sky territory relative to recent months, challenging the 1.1660 - 1.1700 resistance zone. The sheer force of the short-term momentum suggests resistance will likely yield, but perhaps not without a brief "cooling off" first.
Best Action Timeline/Price Action Probability:
1-2 trading sessions: 70% probability of Lateral Consolidation (1.1620 - 1.1660). With the short-term indicators pinned at the top of the range, the market effectively must pause or pull back slightly to reset. A direct vertical move from here is statistically low probability (20%).
3-5 (1 Week) trading sessions: 65% probability of Breakout Continuation (>1.1700). Once the Ultra Short Term indicator cools from its extremes back to the "Strong/Neutral" zone, the dominant Base Term trend will likely assert itself, driving the next leg up.
6-10 (2 Weeks) trading sessions: 60% probability of Trend Extension. The Base Term momentum has room to run higher into the "High Bullish" tier, targeting the 1.1800 handle.
🟢 Bullish Scenario: Parabolic Thrust: The market ignores the extreme overbought reading (a sign of a "short squeeze"). Price smashes through 1.1700 without pausing, driving the Euro vertically towards 1.1750 - 1.1800 as late shorts are forced to cover.
⚪ Base Scenario: Bull Flag / Pause: The pair consolidates the recent surge. Price drifts sideways or slightly lower to test 1.1600 - 1.1620. This allows the fast-twitch indicators to drop from "Extreme Overbought" back to "Neutral," resetting the "firing mechanism" for the next rally.
🔴 Bearish Scenario: Fakeout & Fade: The extreme momentum marks a climax top. Price spikes briefly to 1.1680 and rejects hard, closing back below 1.1600. This "shooting star" price action signals exhaustion, triggering a correction back to the 1.1500 breakout base.
Core Thesis The Euro is in a dominant uptrend, characterized by a high-velocity breakout. However, the short-term indicators are at historic extremes, creating a "buy high" risk for immediate entries. The structural trend is robust, favoring further upside, but the optimal tactical play is to wait for the inevitable intraday dip or consolidation to relieve the "climax" pressure before adding exposure.
Comprehensive Summary The dashboard shows a market in "overdrive." The synchronization of the Ultra Short, Short, and Mid-Term indicators in the "Overbought" or "High Bullish" tiers reflects a powerful wave of capital inflow. The only caution is the mathematical limit of the short-term indicators—markets rarely sustain this level of intensity for more than a session without a reset. Patience for a dip is the strategy; the trend direction is not in doubt.
Multi-Timeframe Trend Analysis (Daily Focus)
Ultra Short Term Indication: EXTREME OVERBOUGHT | Slope: Flat/Upwards
Short Term Indication: EXTREME OVERBOUGHT | Slope: Flat/Upwards
Mid Term Indication: HIGH BULLISH MOMENTUM | Slope: Sharply Upwards
Base Term Indication: STRONG | Slope: Upwards
Breakouts, Breakdowns, and Reversals (Recent Range Focus) Bullish Extension: A daily close above 1.1700 confirms the next structural leg. Bearish Reversion: A close below 1.1550 would signal a failed breakout and likely fill the liquidity gap down to 1.1500.
Key Actionable Zones Immediate Resistance: 1.1680 - 1.1700 (Psychological / Extension). Pivot Support: 1.1600 - 1.1620 (Immediate Consolidation). Critical Structural Support: 1.1500 (Breakout Base). Trend Floor: 1.1400 (Major Swing Low).
Trading Notes/Resources (Where Applicable)
READY TO TRADE: ACTIONABLE AREAS: For active traders who look to generate cash flow on a continuous basis, determining the ‘next best probability’ level to execute against may be of immense value. The blue and red horizontal lines on the chart represent a next best probability buy re-entry range and a next best probability sell re-entry range over the short term. The ranges assume no existing position being held by a trader while the probabilities are based on several factors which may include: short term rating, medium term regime, momentum, horizontal or diagonal support/resistance, candle structure, moving averages and standard deviation, among others. These are short term levels and may be in contrast to medium and long term outlooks which are based on the weekly and monthly charts and, which may be applicable to long term investors. These levels are subject to change based on sentiment, the subsequent price action and company/sector specific or macro news flow. As always, while the levels are outlined, traders should be prepared to adjust in real-time based on the aforementioned.
"Strategy Alerts" help clients identify trading opportunities. When a ticker's real-time or pre-market price action aligns with the criteria on a slide—such as a pullback to the 21-day EMA or a breakout from a consolidation base—it effectively "matches" that stock to the strategy, triggering an alert to a potential trading opportunity. This approach transforms the playbook into a dynamic scanning tool, allowing you to instantly categorize active stocks by the specific technical thesis playing out, ensuring that every trading potential opportunity communicated is backed by a predefined, actionable setup.
THE TACTICAL TRADING GUIDE (PRICE ACTION MODEL): UNCOVER OPPORTUNITIES & ASSESS REWARD-TO-RISK
It helps helps clients determine and shed light on the some of the following:
The CURRENT TECHNICAL POSITION and a PRICE ACTION PROBABILITY for multiple time frames.
Three (3) ‘trading’ time frames are considered: Short Term (1 to 10 days) / Medium Term (2 to 4 weeks) and Long Term (5 to 8 weeks)
Whether the reward-to-risk is attractive for a buy/long position
Whether a share is weak. In this case, wait until the price stabilizes before looking to enter (i.e. want until it stops going down)
Whether aggressive buying is underway. In this case, do not ‘chase’ (do not buy) but instead wait for a pullback to re-enter a buy or an overextension with deteriorating candle structure to sell/short.
Whether a trader can look to buy a pullback into a key moving average (continuation trade)
Whether a share needs to break a range for a new trend to be determined (bullish or bearish)
Whether a traders needs to monitor for a change of character that could lead to a bullish or bearish reversal
Whether a share could start a consolidation phase or before continuing it’s bullish or bearish trend
Whether the upward momentum is slowing (if it's in a bullish phase)
Whether buyers can look to 'phase in' to a position (if it's in a bearish phase)
Whether a share lacks directional bias.
The data set is available in real-time (on request)
The readings are subject to change as the price action develops.
TRADING TIP # 1 Let The Candle Confirm
Out of all those available, Candlestick Charts are the most widely used when it comes to analyzing price from a technical perspective. The interpretation thereof helps traders to understand the interaction between market participants and informs who is in control between buyers and sellers. Various types of candle formation convey key information about the range of outcomes for a share for example, following a downward trend, a long lower tail, doji, piercing or bullish engulfing suggests that buyers have started to become active/started to take an interest while following an upward trend, a long upper tail, doji, dark cloud cover or bearish engulfing suggests that sellers have started to become active/started to take an interest. While information is conveyed pre-market, it is the intraday price action that will confirm any trade or opportunity. While we have a plan, we are also ready to switch gears as the price action develops.
TRADING TIP # 2: Failure & Reclaim
FAILURE to hold a prior session high/range high may signal that the upside momentum is slowing and that an opportunity to short/sell may be at hand. This is often reflected via a deteriorating candle structure which suggests that sellers are starting to take control. Examples of such candles are long upper tails, doji's, dark cloud covers, bearish engulfing candles etc. RECLAIMING a prior session low/range may signal that the downside momentum is slowing and that an opportunity to buy may be at hand. This is often reflected via a improving candle structure which suggests that buyers have started to enter and are looking to take control of the price action. Examples of such candles are long lower tails, doji's, piercing candles, bullish engulfing candles etc.
TRADING TIP # 3: Take Note of the 'Igniting Bar'
This is a large green or red candle which suggests that traders should: TAKE NOTE note of the change in characters and potential change of the trend. TAKE NOTE of a potential acceleration of the trend. TAKE NOTE of potentially aggressive buy or selling Often, BIG MOVES start with BIG MOVES.
Core Trading Principles: Short and Medium Term
Trade with the primary trend.
Volume Matters. This represents the interest of large institutional investors who have the ability to move a share, both up and down.
Do not short/sell a share that is above, and in close proximity to it’s rising 8 and 21-day moving averages. This trend can persist for an extended period.
Ultra short term traders, if a share has advanced strongly over a 3-7 day period, book profits. You can always re-enter and do the same trade at lower levels.
If a share is printing a large bullish (green) candlestick following an extended move, use the strength to sell. The likelihood that the share retraces is high.
If a share is printing a large bearish (red) candlestick following an extended move to the downside, use the weakness to start a long position. The likelihood that the share rebounds is high.
Trade in the direction of the 20-day moving average, using the MA as a level to enter as well as a hard break thereof as a trailing stop-loss.
The 8 and 21-day moving averages often act as support and resistance levels. When they are turning down, use them as levels to sell into. The opposite applies when they are turning up.
The first back-test and undercut of the 50/75-day exponential moving average range has a high probability of holding as support or resistance. Buy or sell it for a 1-3 day move to generate cash flow.
Stocks above a rising 200-day moving average spend the majority of their time trending higher. The opposite applies when the 200-day is trending down.
Previous support can turn into resistance and previous resistance can turn to support. Use these zones as levels to trade against.
Support and resistance levels and key moving averages are ranges rather than exact levels. They often overshoot these zones before occasionally reversing at these levels.
Respect the FIB (Fibonacco) retracement zones. They often act as support and resistance levels.
‘PAY-tience Pays’, however be nimble to react to opportunity to cut when a trade hasn’t been working.
Above all, know your time horizon.
Lester Davids
Senior Investment Analyst: Unum Capital
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