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EUR/USD Trading Strategy for the week 27-31 Jan 2014

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EUR/USD Chart 27 Jan 2014
5/5 of 2 ratings

Will the Euro continue to charge higher in this volatile market?

We can't answer the question above for sure, due mainly to the fact that certain factors remain unknown, however what we do know, and what we certainly believe is that market volatility is here to stay.

The Euro managed to rally sharply last week

We would buy daily and hourly calls on a break above last week's high marked around 1.3739 and we would buy daily puts if the price manages to close lower than 1.3760 in European trading hours on Monday. Both scenarios assume an hourly close above or below these levels.

Monday's most important news come from both sides of the isle. On one hand we have the IFO Institute's economic sentiment number released at 09:00 GMT, while the second part of the day will bring our attention to New Home Sales in the US. Both numbers are market moving so keep a close eye.

On the charts the Euro has managed to pull off quite a rally last Thursday rising about 1.5%. On Friday it tried to probe levels above 1.37 and for some time it seemed as if it will hold on above the figure, however the ECB's President Mario Draghi sounded not so optimistic at eh annual economic forum in Davos, so the Euro was sold off.

The single currency will need to sustain a break above 1.37 in order to maintain momentum and charge higher towards 1.38 and 1.39. It is our view, that this can be achieved, should underlying economic data that we have released this week supports further expansion in the Euro Area.

As emerging market currencies continue to fall in a rather dramatic fashion the US dollar can start benefiting at some point. As traders are bringing money back home from Emerging Markets those flows can prove to be quite substantial.

Keep a close eye on further developments on the charts, we will be here to comment and update our strategy in a timely manner. Consolidation is the current theme with any break to trigger a new trade on our side.

Comments

Matt T.'s picture

We have managed to secure a great trade for our readers yesterday. As we wrote, once the Euro was through 1.3620 it never looked back up and fell considerably to trade at current levels around 1.3550. It would take some extraordinary event to pull it back up so we keep our bearish stance. In order to enter new put option positions fro today's expiry we would have to see some sort of correction. We leave to our readers to decide on where to act, however our personal preference is to buy daily puts at 1.36.EUR/USD Chart 31/01/2014

Matt T.
Matt T.'s picture

Since the Federal Reserve has delivered what was expected, the market has not reacted much to the news. For those who took our advice and bought daily calls on the drop to almost 1.36 (that was even lower than we expected) yesterday has been quite profitable. The pair is looking for direction today and we have outlines the key trend lines that will help us take our next decision. If we see an hourly close roughly below 1.3620 then we would be buying puts for a daily expiration, on the other hand if prices break above 1.3670 and and hourly close is confirmed, we would be buying calls.EUR/USD Chart 30/01/2014

Matt T.
Lockery's picture

EUR/USD keeps the range to the area of 1.3645/40 after the Fed delivered a $10 billion taper

Lockery
Toni H.'s picture

Yes I think so

Toni H.
Lockery's picture

Thanks, do they offer deposit bonus?

Lockery
Lockery's picture

Yes, I mostly trade forex binaries with combining fundamental and technical analysis.

Lockery
Toni H.'s picture

Hi Lockery, thanks for your positive comments, you are interested in currency pairs trading?

Toni H.
Lockery's picture

Very interesting trading, I had set up a similar strategy for this week, would you recommend a good broker for trading binaries?

Lockery
Matt T.'s picture

Those of you who have followed our call yesterday to sell daily puts around 1.3750-60 have been disappointed since the pair has not reached those levels. However we are currently revising our strategy and switching our view before the Federal Reserve meeting later during the US session tonight that is supposed to cut bond purchases by further $10 billion. Should we see this decision become a fact expect a small spike lower that should be negated as the market is already widely expecting that tapering will happen. We will be buying calls on a daily basis for today and tomorrow on price weakness below the blue line on our chart. EUR/USD Chart 29/01/2014

Matt T.
Matt T.'s picture

The Euro currency is finally on the move. The downside has been broken and our put trading scenario is in play. Buy puts on any rallies towards 1.3750-60 on a daily basis. More aggressive players can try to play hourly options too, however for us that would be a hard gamble. We like to stay in control of our calm minds, this is why daily options are the best. Next key support level is around 1.3625, expect an accelerated pullback if that level is broken on a sustained hourly basis.EUR/USD Chart 28/01/2014

Matt T.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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