The Euro still trading higher and higher
As the week draws to a close we are issuing our last forecast and last opportunity to conclude today's expiry in the money. We would be buying calls at current levels on the EUR/USD binary options forex pair. There is no substantial reason to believe that the US dollar can rebound substantially in the coming couple of hours, quite the contrary - 1.39 will be in focus.
In our view the only counter argument is if the price drops below support levels in the 1.3860-65 area and closes below on an hourly basis. Then we would be hedging our exposure and buying puts with a doubled bet to make up for the incurred loss on the daily call bet. That said, we are quite confident in our bet as of right now.
The main reason is that the US dollar has not been able to stage any rebound in the last couple of days. It has been a disastrous week for it so far, and we are expecting to see the trend continue into next week and a possible test of 1.40 suddenly seems quite likely.
With the bulk of the data that came out this week we are certain to aspire to such a scenario, mainly because of the Federal Reserve minutes that were released on Thursday, while Janet Yellen has been perceived hawkish at the press conference after the meeting, the minutes reveal, that she might have been misinterpreted by the markets.
The main clue to take out from the latest move is that the US dollar appears to exhibit no sign of strength in the coming days. While levels around 1.37 have been probed, apparently that was that. Future strength of the market depends on Euro weakness, as the Federal Reserve does not appear to be convinced to move interest rates higher any time soon.
The European Central Bank will be faced with a challenge - whether to gamble on a bigger scale and introduce some sort of an unconventional easing policy or not. If it doesn't act any time soon, the possibility of a deflationary spiral in the Euro area might cause further discrepancies across the continent.
Looking at the charts, key resistance is around 1.39 on the hourly charts, and key support levels are in the above mentioned area around 1.3860-65. Happy trading and happy weekend!