The Euro is about to test a key upside trend line
WE would be wrong not to pay attention to the recent rise of the Euro in the aftermath of some hectic Monday trading where it lost a substantial amount of value only to recover later in the day and deliver some solid performance in the first hours of Tuesday trading in Asia.
While for now we see buying calls as the preferred strategy, we need some conditions to be fulfilled in order to maintain our commitment to the pair going up by the end of the day. Looking at the chart that would have to be an hourly close above 1.2550 to establish some sort of certainty.
On the other hand we are seeing some serious risks related to the single currency going lower in light of the Euro Area GDP forecast reports by the European Commission. Let's look at those as an opportunity for now, since we are firm believers that there will be enough demand below the round figure and around 1.2490 to drive prices up.
This brings us to the second scenario which we would gladly trade - a drop in prices toward the above mentioned 1.2490 level and buying of call options right then and there. While the growth forecasts by the European Commission are not likely to be rosy, we are of the opinion that most of this negativity is priced into the market.
Last but not least let's see what the US has to offer in terms of data today - we have the trade deficit which is expected to shrink further, but remain way into negative territory and factory orders data, which could provide us with some opportunities, however we don't expect anything material from this data.
Last but not least, if the data from the EU is way too negative we could see the Euro break through on a sustained hourly basis below the key 1.2490 support level which would open the door to the downside again and we would be buying daily puts for tonight's expiry at 20:00 GMT.