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Trading EUR/USD: High Bullish Momentum But Overbought On Weekly Time Frame

  • Writer: Lester Davids
    Lester Davids
  • Jun 29
  • 2 min read

Research Notes For 30 June to 04 July > https://www.unum.capital/post/r3004july

Trade Local & Global Financial Markets with Unum Capital.

To get started, email tradingdesk@unum.co.za



Short-Term Playbook

  • Current State: AGGRESSIVE BUYING UNDERWAY

  • Key Question: Do the highs fail to hold?

    • If YES: The recommended action is to Short/Sell on failure, targeting the 8/21-EMA.

    • If NO: The recommended action is to wait for a pullback to the 8/21-EMA before considering a buy.


Multi-Timeframe Condition

  • WEEKLY TIMEFRAME: OVERBOUGHT

    • This suggests the uptrend is extended and vulnerable to a pullback or reversal.

  • MONTHLY TIMEFRAME: APPROACHING OVERBOUGHT

    • This indicates the long-term trend is also becoming extended, adding caution for new long positions.



Dissecting the Price Action Model

  • SHORT-TERM (1-10 Days): Aggressive buying. WAIT for a pullback to enter, or alternatively, SHORT a failure at the highs.

  • MEDIUM-TERM (2-4 Weeks): Very strong move, buyers in control. Do not chase. A failure to hold the highs makes the 8-EMA a short/sell target.

  • LONG-TERM (5-8 Weeks): The medium-term view persists. Strong buyers, but a failure at the highs targets the 8-EMA for a short/sell.


Price Action Probabilities

  • Bullish Continuation / Breakout: 55%

    • The most likely scenario. The underlying strength continues, pushing the price decisively above the prior highs.

  • Bearish Failure at Resistance: 35%

    • A significant probability. The price tests the highs but fails to break through, triggering a tactical sell-off towards the 8-EMA.

  • Shallow Pullback / Consolidation: 10%

    • The pair consolidates just below the highs, gathering strength before the next decisive move.


Fundamental Catalysts

Bullish (Tailwinds)

  • Hawkish ECB Policy: Higher interest rates from the European Central Bank, or signals of future hikes, make the Euro more attractive relative to the US Dollar.

  • Strong Eurozone Data: Better-than-expected economic data (e.g., GDP, inflation, employment) from the Eurozone can signal economic strength and boost the Euro.

Bearish (Headwinds)

  • Hawkish Fed Policy: Higher interest rates or a 'higher for longer' stance from the US Federal Reserve makes the US Dollar more attractive, weighing on the EUR/USD.

  • Global Risk Aversion: During times of global uncertainty, the US Dollar often strengthens as a "safe haven" currency, which typically pushes the EUR/USD pair lower.


Lester Davids

Senior Investment Analyst: Unum Capital

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