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.