The Dollar Surge and the Aftermath
This is a daily chart of the EUR/USD pair that focuses in on
the short entry (average) above 1.2350 and measures the height of the move set
in this month and includes the lows of Friday's trading session
Temporarily EUR/USD bullish just on the depth of the oversold conditions
Typically fibonacci numbers can be used to retrace a dominant move and determine references for how much it can retrace its footsteps. Here's what I mean, EUR/USD traded at 1.24737 at its relative peak at the left side of the chart. And we measured the range and placed the bottom end of the fibonacci tool to the bottom at 1.20587 and so for the 425 pips the pair dropped, each level indicated in between the candles goes from 23.6%, 38.2%, 50% and 61.8%
Although there is no guarantee that price will move back up to the 50% retracement at 1.22173 the 50% has been reliable as a technical principle.
Now since we are short EUR/USD if the pair continues rising the short position becomes worth less and we give up gains, so I decided to balance the trade to hedge against the prospect of giving up gains.
I see some value in AUD/USD and that would be a good hedge and for now possibly a good time to be long. The long position is set with one entry for now at 0.75551. There are some very heavy resist points at 0.78 and I don't have that much faith in it, but anything is possible, if there is a need to lock in gains, it will be because of a consolidation phase and then the next turn down.
So what I will leave you with here is my perception of the dollar index showing some early stages of a mini-top, there is a topping tail that is showing bigger sellers, and evidence that institutions are getting out for the time being and for that reason a hedge would be logical for traders with pro-dollar positions especially if they are held overnight
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