EUR/USD Setting for a move lower in early European trading
As Tuesday trading kicks off in Europe, the EUR/USD pair is setting itself up for a move lower. While there is no immediate impact on the prices from any new information this morning, it is safe to say that the rising tensions between Greek politicians and their European peers could impact the currency market substantially.
While the EUR/USD is still consolidating just above 1.1300 the uncertainty in the near term is very likely to weigh on the exchange rate in the coming hours before the Eurogroup meeting starts tomorrow. While the ranges in the pair might remain intact, we are certain to see some action before the event.
Looking at the charts we have seen a sharp move lower yesterday to test bids around the 1.1270 area, however those have proven to be solid enough and supported the rate in late London and early New York trading. The pair has since traded in a very narrow range with the mid point focusing around 1.1330.
On the topside we have seen two tests yesterday. The first shot higher attempted a break above 1.1360 and the second one pierced through 1.1350. Both attempts were capped by solid offers pushing the rate towards the midpoint.
In our views the best course of action in this pair is to sell rallies towards the red line on the chart, which is currently somewhere between 1.1345 and 1.1350. The main obstacles above are focused around that point, but the levels are unlikely to be broken materially.
What we would be doing is buying daily puts on this pair for an expiration sometime between 20:00 GMT and 21:00 GMT today. Only if the red line is decisively broken to the upside, would our scenario be invalidated. For those of you who are more aggressive buying daily puts at current levels might be a good strategy, but a more risky one.