Following a new one month low, the Euro has rebounded somewhat
After the Euro has rebounded from lows just below 1.3650 we are seeing some opportunistic buying from traders which are betting that the trend could continue. That happens in light of recent inflation data from both sides of the Atlantic which spells some divergence ongoing which really favours the US dollar at this point in time.
With the sharp drop in recent days in the Euro to the US dollar binary options forex pair, we are seeing some stark differences in inflation rates in the Euro Zone to those in the US. Central banks are more likely to raise interest rates in an environment where we are seeing inflation picking up, and this is what the market is thinking right now.
However throughout the afternoon we have seen some buying emerge for the single European currency which could be a great opportunity to buy daily puts for today and tomorrow's expiry. We are purchasing the mentions binary options in the EUR/USD at levels around 1.3720.
The morning started with European GDP data, which saw Italy and France under-performing while Germany has grown faster than expected. The resulting divergence is likely to put more pressure on European monetary authorities to tackle the exchange rate as a tool to improve the outlook for French and Italian growth numbers.
In France we were flat quarter on quarter with the economy stagnating, while Italy has contracted by 0.1% over the quarter and by 0.5% on last year's figures. With the coming of the afternoon we have seen US data come out with the inflation numbers being higher than expected resulting in a slew of commentary that the FED might have to act sooner than expected to raise interest rates.
As a result after the Euro has fallen to session lows around 1.3650, some profit taking has emerged driving prices higher back above 1.37. In our view however this only provides a good put buying opportunity. We will only reverse this call if we a see a sustained hurly break above 1.3750, which would result in buying daily calls.
Tomorrow's data is not likely to impact the outlook very much with the most important news coming late in the afternoon, when a fresh batch of US housing data will be released.