EUR/USD Long Counter-Trend Setup (4H/8H Timeframes)
I’m looking at a long counter-trend trade on EUR/USD based on several technical confluences across multiple timeframes.
Market Sentiment: Currently, risk sentiment is “risk-off,” which has pushed the dollar higher, but now we’re seeing signs of a potential reversal in both EUR/USD and the Dollar Index (DXY).
Key Observations:
Engulfing Candles on the Daily Timeframe:
Both EUR/USD and DXY have printed engulfing candlestick patterns on the daily chart. This could signal a potential reversal, with the momentum shifting in favor of EUR/USD.
Monthly 20 MA:
The 20 MA on the monthly chart is being tested on both EUR/USD and DXY, adding to the importance of the levels we’re currently observing. A bounce or break here could trigger significant moves in either direction.
5 EMA Hit Probability:
On the weekly timeframe, the 5 EMA lines up with my 4H target. Historically, if a session doesn’t hit the 5 EMA, the next one has a higher probability of doing so, something to be mindful of as we approach the weekly close.
Divergence on Multiple Timeframes:
MACD divergence is present on the 4H and 8H timeframes for EUR/USD, suggesting weakening downside momentum. Additionally, there’s a bearish divergence on DXY and a bullish divergence on EXY (Euro Index), further supporting the case for EUR/USD upside.
Conclusion:
With the alignment of these factors—candlestick patterns, moving averages, and divergences—this setup presents a solid opportunity for a long counter-trend trade on EUR/USD. While it’s a counter-trend trade, the confluences from multiple timeframes increase the probability of success. Keep in mind that this trade is aligned with technical signals and risk sentiment, so proper risk management is essential.
Market Sentiment: Currently, risk sentiment is “risk-off,” which has pushed the dollar higher, but now we’re seeing signs of a potential reversal in both EUR/USD and the Dollar Index (DXY).
Key Observations:
Engulfing Candles on the Daily Timeframe:
Both EUR/USD and DXY have printed engulfing candlestick patterns on the daily chart. This could signal a potential reversal, with the momentum shifting in favor of EUR/USD.
Monthly 20 MA:
The 20 MA on the monthly chart is being tested on both EUR/USD and DXY, adding to the importance of the levels we’re currently observing. A bounce or break here could trigger significant moves in either direction.
5 EMA Hit Probability:
On the weekly timeframe, the 5 EMA lines up with my 4H target. Historically, if a session doesn’t hit the 5 EMA, the next one has a higher probability of doing so, something to be mindful of as we approach the weekly close.
Divergence on Multiple Timeframes:
MACD divergence is present on the 4H and 8H timeframes for EUR/USD, suggesting weakening downside momentum. Additionally, there’s a bearish divergence on DXY and a bullish divergence on EXY (Euro Index), further supporting the case for EUR/USD upside.
Conclusion:
With the alignment of these factors—candlestick patterns, moving averages, and divergences—this setup presents a solid opportunity for a long counter-trend trade on EUR/USD. While it’s a counter-trend trade, the confluences from multiple timeframes increase the probability of success. Keep in mind that this trade is aligned with technical signals and risk sentiment, so proper risk management is essential.
Note
Update:
I’ve also noticed bearish divergence forming on the daily timeframes of DJI, SP500, and NDQ. This is something to watch closely—if these indices start to turn bearish, we could see USD strength as a result, potentially affecting the EUR/USD setup. Keep this in mind as it could impact the overall direction of the trade.
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