Euro gearing for another leg higher this morning
As risky assets across the board are being sold off, short positions in the Euro currency have also been diminishing in recent sessions. The EUR/USD exchange rate has marked quite a rally yesterday, however it proved to be short lived. After soaring initially towards 1.2450, the pair ended New York trading around 1.2380.
The main factor behind the US dollar weakness has been the sentiment on the global stock markets. Yesterday the Athens stock exchange has fallen 13% triggering liquidation of long positions across assets in the whole wide European Union stock markets.
With liquidity in the Euro Zone drying up, despite the persisting negative environment, the pair has benefitted from flows back into the single European currency. With the EUR/USD trading close to 13.5% lower this year we see a correction towards the end of the active trading period this year as more than likely.
Looking at the technical picture we have seen the pair trading in Asia lower towards 1.2363 before stabilizing and embarking on a rally back towards 1.2400. With current prices hovering around 1.2390 we see this level as a good call buying opportunity.
For the day ahead, our view is that the pair will close higher than 1.2420 at the expiry time around 20:00 GMT. The only obstacle to that would be some negative comments from EU officials, but we don't see this happening for now.
Nevertheless, the alternative scenario which we have in play is for the EUR/USD pair to close on an hourly basis below 1.2340. Only then we will consider buying daily puts and it still seems like a remote possibility at the current juncture with prices stable just below 1.2400.