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EUR/USD Forecast 19 May 2014

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EUR/USD Chart 19 May 2014
Average: 3.6 (5 votes)

The Euro is likely to remain under pressure below 1.3750

As the new week kicks in we are having an uneventful Monday with most currencies trading within recent ranges, the notable exception being the Japanese yen, which makes a new move higher across the board. The Euro hasn't moved much as activity remained subdued due to the lack of data in today's sessions.

On both sides of the Atlantic we have had a very quiet session in terms of data and on terms of movement in the EUR/USD binary options forex pair. At this point in time we feel confident to buy daily puts for tonight and tomorrow the 20th of May, as the levels currently traded are around 1.3713-15.

There are no major setback for the Euro, but we could argue that after the market paused in the second part of the week there is now scope to sell the single currency even lower in the expectations of an ECB rate cut in the beginning of June. That said, it is not necessarily a done deal, however recent ECB comments confirm this bias.

ECB's Nowotny, who is the governor of the Austrian Central Bank has stated that while European citizens are fearing inflation, the central bank authority is fearing a Japanese style deflation scenario. He added further that a deflation scenario is very difficult for a central bank to overcome by itself.

We would argue that he is quite correct in this assessment, and that the European growth is not dependent on the ECB going forward. It is very likely that key geopolitical developments could have way more pronounced effects on the single currency with so much going on on the borders of the EU.

Meanwhile the Dallas Federal Reserve Bank chairman Richard Fisher expressed concerns about the lack of volatility in the markets. Well any experienced financial market aficionado knows that periods of low volatility are followed by... you guessed it right - periods of high volatility.

So with the low volatility in the EUR/USD today we are expecting this trend to be reversed in the coming hours with a move to the downside in the pair for tonight's expiry and tomorrow's too. Our level to buy the put binary options is at 1.3713.

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