Last week, as predicted in my previous weekly blog, the Dollar Index has found resistance at the top of what appears to be a trend and has been depreciating all week. In my Vlog (see my YouTube channel: TakeMyTrades) I talk about a probable reversal pattern in the Index Dollar. You might want to go and listen to it as I have shared more reasons why I see a depreciation of the Dollar. The sell pattern that we will see in the Dollar is higher due to a corrective move rather that a complete reversal, as I do expect the Dollar to continue its appreciation in the long term. This week, one piece of fundamental news that may affect the Dollar index is that of the President of the ECB Mario Draghi on Thursday 8th December, when he talks about the decision taken on interest rates and the overall economic outlook. I see the Dollar finding support at around the 97.00/96.00 price area.
As expected, the EURUSD has not only found a support which clearly comes from the past but has created an Inverted Head and Shoulder on the daily and 4 hours timeframe. An Inverted Head and Shoulder is a significant reversal pattern created by the Big Boys to communicate a reversal in the market. I want to point out the difference between Inverted Head and Shoulders. In the case of the EURUSD, the inverted pattern created does not necessarily mean a complete reversal for a new uptrend, but instead communicates a corrective reversal for more continuation as a sell.
Between the opening of the Asian Market and the early hours of the London Market, we might see some volatility due to the Italian constitutional vote. If it’s a NO vote, I suggest that we trade the EURUSD AFTER the short sell as long as it doesn’t negate the Inverted Head and Shoulder. As mentioned previously, we also need to be vigilant on Thursday 8th December, as the ECB will decide if there is a change in interest rates. No change is expected.
Trade idea: If it’s a NO vote, I will be waiting for a possible strong sell move and will then start buying the Euro, only if the price does not go below the support area shown to us last week. In the London Live Trading Room we will look at the take profit price level if there’s an opportunity to buy.
If it’s a YES vote, I will expect two outcomes: no strong move in the EURUSD or strong buyers coming into the market. I will buy the EURUSD only after the retracement of the first impulsive move as a buy.
Written by Elkana Roveglia – www.TakeMyTrades.com