The Euro is consolidating its losses after the Federal Reserve Meeting
The Euro currency has been slowly consolidating after losing substantial ground on Wednesday and testing levels close to 1.2830. Ever since we have seen somewhat of a lack of consistency and determination in the moves of the Euro. With all the focus on the Scottish independence referendum and the British pound this is no big surprise.
We are not expecting any material data of Friday, this is why we are holding the view that the single European currency will do some rebounding. the EUR/USD is vastly oversold and the past few weeks have been a relentless decline feast for the Euro bears. We would say that it is now very likely to see a weekly close above current price.
That said, for the safest bet we would recommend wait for a retest of the base around 1.2930 in order to buy daily calls and refrain from aggressive positions. However for those of us who have higher risk tolerance, current levels around 1.2860-65.
The main risk events for currency traders going forward are non existent today. As the euro has already collapsed after gaining on the USD in the morning, we are more likely to see quiet Friday trading. That said, are will take this trade and hope for the best, certainty on this forecast is 70%, so beware.
On the alternative side, if we see some volatility and the Euro selling picks up again, we are looking for a close below 1.2830 to buy daily puts and look for a break below 1.2700. In the case that there is no meaningful case to build a bearish case for the US dollar, we will wait for next week to provide additional data.
The technical picture looks solid and further buys are warranted if we see a break above 1.2890. In that case we would be looking to see a rise towards 1.3000 by the end of next week as forex volatility has finally returned to the markets.