The EUR/USD keeps consolidating opening potential for a move
As the EUR/USD pair keeps consolidating, we are likely to see a trading opportunity emerge before the end of the trading session in New York today. Binary options on the most traded currency pair are currently trading around 1.0570 which is only a touch higher than daily lows just which are just above 1.0560.
The U.S. released today Producer Price Indices, which came out lower than expected helped by the strong U.S. dollar in the first couple of months of the year. With wages growing moderately cost pressures are not likely to materialize for the U.S. economy any time soon laying a helping hand to the U.S. Fed.
The Federal Reserve has committed to raise interest rates once it deems necessary, but the market is currently expecting that the most likely timing for the first interest rate hike is the June meeting later this year. Pressure on the EUR/USD has been substantial in recent months and the pair is greatly oversold on monthly and weekly charts.
That said, the bounce which some market players (including us) have been expecting simply does not occur yet. The greatest pressure on the rates is coming from additional worries related to the situation in Greece. Recently the President of the European Central Bank, Mario Draghi has stated that risks to the rest of the EU from Greece are lower.
We tend to agree with him on this point and are betting that once the U.S. inflation numbers continue to come in lower, the expectations for an interest rate hike by the U.S. Federal Reserve will subside substantially. There is no information about when precisely will that happen, but for now we side with the thinkers who do say that the U.S. dollar has overshot.
We would be buying daily calls for tonight's expiry on an hourly close above the trend line which is currently at 1.0615-20, while keeping in mind an alternative scenario and buying daily puts in case prices close below 1.0560 until the rest of the trading day today.