ForexTrading Idea

EURUSD: Rebound is coming? |ABC Pattern|

Resilient U.S. data and geopolitical worries keep the U.S. dollar at risk of further gains, but there are FX options that can hedge that risk for minimal cost. A USD call option gives its holder the right but not the obligation to purchase the USD at a more favourable price at a specific level (strike) on a future date (expiry) and only risks an up-front premium. Shorter dated expiries and strikes further from the current spot rate will reduce the premium, as will placing a knock-out trigger below the strike. With option implied volatility and its additional USD call over put premium reasonably high at present, a knock-out trigger could certainly benefit those who think the USD’s upside might be limited pre expiry.

For example, with EUR/USD spot at 1.0530, a 1-month expiry 1.0500 EUR put/USD call gives the holder the right to sell EUR/USD at 1.0500 on Nov. 16 and costs 70 USD pips, so profit at 1.0430. Adding a 1.0300 knock-out trigger will reduce the premium to 11 USD pips, because the profit potential is more limited and the option is dead if the trigger is touched before expiry.

Intraday Analysis | 1H |

From a technical point of view, the trend is bearish on intraday chart, but if the pair manages to stay above wave B, an interesting technical bounce is possible. Looking at the 1H chart we have a resistance area (Target 1) around 1,060/1,063, here the pair could form a bearish harmonic structure (see chart below). If the pair triggers wave A breakout, the harmonic will fail and the swing will take the shape of an ABC Pattern.

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