The EUR/USD has been consolidating its losses yesterday with the single European currency taking charge at 1.1300 before the open of the U.S. trading desks in New York. With the U.S. traders coming online, the pair has dropped down to 1.1285 which is opening some opportunities for trading this pair.
We are taking the view that the EUR/USD will be moving lower by the end of the trading session in New York today and have several points to make on what are the conditions for that to happen. The main idea around this trade is technical, but there are several fundamental factors involved in it too.
Firstly, we are awaiting the vote for the U.K. referendum on the European Union tomorrow and we think that the range of the price in recent days will remain intact due to the lack of major news. Secondly we are seeing the EUR/USD charge on 1.1300 once more and we think there might be good sell orders there which will drive prices lower.
Lastly the news out of the U.S. this afternoon which are related to the housing market are likely to be rather positive for the U.S. dollar. Even if they are, we have an exit strategy from our main scenario which is that the EUR/USD will drop lower before the end of the trading day.
How to trade
We are taking the view that the single European currency fill fall against the U.S. dollar after touching 1.1300. This is why we are preparing to buy daily put options at those levels for the expiration at 20:00 GMT, when the price hits the round figure.
Mario Draghi, the European Central Bank's (ECB) President has stated yesterday that the monetary authority is prepared to do more stimulus, which will affect the EUR/USD negatively. We would only reverse our call and refrain from trading this pair if the price closes above 1.1300 on an hourly basis in the coming hours.
If we see an hourly close with the price above 1.1300 we would be buying daily call options on any approach back to the round figure, but only after the close.