The EURUSD has launched a strong rally after hitting its 200 DMA and formed a rising wedge formation as visible on this H4 chart. The last ten candlestick formations have indicated that the rally lost its steam and has formed a new temporary top. We expect this pair to start a correction and bearish pressures to cause a breakdown of the formation amid heavy profit taking.
MACD has indicated the top and failed to confirm the new highs while RSI has been trading in extreme overbought territory which it will not be able to hold for an extended period of time. Look out for a breakdown into overbought territory and below which should fuel the correction.
We recommend taking a short position at 1.3175 with a potential second entry point at 1.3300. Should this pair breach the 1.3250 level to the upside we recommend traders to hedge their initial short position with a long hedge before adding new short positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 1.3250. We do not use stop loss level and will execute this trade as recommended. Place your take profit level at 1.3100.