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Medium-term Trading Idea: FX EURUSD – Bear Speculation

Trading opportunities on currency pair: the euro/dollar dropped 431 points (-3.91%) from 1.1034 to 1.0603. The risks are slanted in favor of a further fall for the euro. A renewal of the minimum at 1.0461 will shunt the pair to 1.0200. Taking correctional movements into account, the euro should reach parity with the US dollar by the end of November this year.

Many traders have started to worry about whether the euro will reach dollar parity. This has provoked my return to the EUR/USD.

Earlier in the year I believed that the euro would reach USD parity by the end of November this year.

On 18th March after the US Fed’s Janet Hellen gave a speech the euro/dollar recovered to 1.1034. After the FOMC convened they had a press conference where Hellen led the market to believe that the central bank was concerned by the excessive strengthening of the dollar and therefore put off a tightening of monetary policy. Traders realized that the Fed will have its first rate hike in September. The speech caused massive fluctuations on the market. Traders flurried to eliminate short positions, whilst some of them were closed by protective stops.

After the protocol of the meeting (8th April) was published, the dollar’s growth resumed. The rate of the euro dropped on speculation that the US Fed may start to lift its base rates in June.

Last week the euro/dollar dropped 399 points (-3.62%), from 1.1002 to 1.0603. Pressure on the euro weakened towards the end of the day. Profit making on short-term short positions before the weekend offered support to the pair.

Below I’ve put two graphs. The minimum, 1.0461 is formed on the limit. To understand where I got that line from, have a look at the monthly graph. A joining of the lines from minimums 1.2329 and 1.1875 gives us the diagram. The lower limit of the monthly goes through 1.0200. In the following month the limit will shift to 1.0160.

As we see, the risks are slanted towards a reduction in the euro.  When the minimum renews at 1.0461, the pair moved towards 1.0200.

On Monday I always look at movements against Friday to see if on the last day of the week there was a unidirectional movement up or down. If on Friday a currency pair was trading in a sideways trend or rebounded in relation to Thursday, then on Monday I look at an impulsive movement in that direction. In the current situation, I’m waiting for a rebound to 1.0636 and then a renewal of euro sales from the LB line.

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Week graph

Month graph

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