EURUSD is tracking a range of 1.2000 to 1.1850 (white shaded area), with the 200-day MA supporting – the 5-day EMA is moving perfectly sideways and the 20-day MA is also about to start moving sideways. We see stochastic momentum and the 14-day RSI at mid-range, while EURUSD 1-week option implied volatility sits at a lowly 5.91% - the 17th percentile of the 12-month range, implying a daily move of 59-pips.
This is about as neutral a set-up on the daily timeframe as we’re likely to see. I guess one can put a Bollinger band on the chart and play this from a mean reversion strategy. However, the fact is the market has hit a fair value and when there's conflict and disagreement and the market is unable to form a consensus then we see range trading come into its own – which is the case now.
When EURUSD breaks and starts to trend then this should be respected, but as is generally always the case let the market push the trade.
The fundamentals are incredibly conflicting and it's easy to see why EURUSD tracks sideways.
Weighing all these forces together, on a net basis one can make a case that perhaps the EURUSD should be weaker than it is and through the 200-day MA. That said, markets are forward looking and absorb aggregate capital flows, so the fact EURUSD is not weaker despite these USD tailwinds is of clear interest. When we have such complicated forces, all competing for influence sometimes it's easier just to watch price and wait for the move, as when it comes it could be highly influential. Ready to trade the opportunity?
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