On the basis of issues faced by the Euro zone, we recommend going short in the EURUSD pair on March 29th. The strong increase in US home sales also influenced our suggestion. In this regard, for currency traders, we had provided 1.0840 and 1.0730 as entry and exit levels, respectively. For binary options traders, an investment in a put option was suggested. Both trades ended in profit, a week later, when the EURUSD pair fell to a low of 1.0569. While the outlook for the Euro remains bearish in the medium-term, we believe the EURUSD pair would see a bullish reversal in the short-term due to arguments presented underneath.
One of the main reasons for the Euro dollar to lose its value against the Greenback is the decline in the Euro zone inflation to 0.7% in March, from 0.9% in the previous month. However, analysts at Commerzbank clarified that the decline was partially due to a change in the reporting method and should not be a cause of worry.
The opinion of the Commerzbank staff was confirmed by the German trade surplus of $21 billion in February. The figures reported by Destatis were not only better than analysts’ expectation of a surplus of $19.4 billion, but also higher than the prior month’s trade balance of $18.9 billion.
In the US, one of the most-watched employment data – the non-farm Employment change – did not meet analysts’ estimates. According to the Bureau of Labor Statistics, the US economy added 98,000 jobs in March, versus analysts’ expectation of 174,000 job additions. In the previous month, the unemployment change figures stood at 219,000.
The US Census Bureau reported a 0.4% m-o-m increase in the wholesale inventories in February. In the earlier month, the wholesale inventories declined 0.1%. Analysts anticipated inventories to increase 0.1%. An increase in inventories is expected to have a negative impact on the Greenback.
The failure of Trump and Republicans as a whole to repeal Obamacare continues to keep the US dollar under pressure. Economists believe that the US dollar would strengthen only when companies begin reporting strong quarterly results later this month. Thus, fundamentally, the Euro is expected to gain ground against the Greenback in the short-term.
The EURUSD pair has broken the descending trend line, after finding support at 1.0580 levels. The ascending stochastic oscillator and positive divergence of the MACD indicator confirms an increase in the momentum. Thus, we can expect the Forex pair to reach the next resistance level of 1.0730.
By going long in the EURUSD pair near 1.0600, a trader can expect to gain from the probable uptrend. The long position can be diluted near 1.0730.
Likewise, a binary trader can position himself to gain from the impending uptrend by investing in a call option. Such a contract, which expires in a week, should be bought when the currency pair trades near 1.0600.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
