EURUSD on side-lines prior to long bank holiday weekend
|The Euro has been trading within a tight range since the beginning of the week, with most price action between a low of 1.05699 and a high of 1.06298. The markets a winding down for the long weekend ahead, with major financial centres closed tomorrow and London closed Monday as well.
The Euro has been under a lot of pressure recently as the continent faces two major elections in France and Germany this year. The French presidential election is expected to be won by a moderate candidate, but the far-right candidate Le Pen may still have a chance of winning in the second round as polls show 40% of voters are still undecided.
Economic data from the US has also been strong, except last week’s Non-Farm Payrolls number, which was much lower than expected. The markets didn’t seem too concerned as the poor data was attributed to the severe weather which had hit many parts of the US. We may get further indications of inflationary pressure is in the US as tomorrow we will have CPI data released.
CPI Core YoY at 11:30 am is expected to equal last month’s number at 2.7% which would show steady price increases and would probably keep the Federal Reserve on target for its current tightening policy.
If you feel that the Euro will rise against the US dollar over the next week then all you need to do is buy a Call option, which gives you the right to buy EURUSD at a pre-set price (strike), on a specific date (expiry) and for an amount of your choice.
The screenshot below shows a EURUSD Call option with a 1.05985 strike, 7-day expiry and for €10,000 would cost $41.60, which would also be the maximum risk.
This screenshot shows the profit and loss profile of the above Call option, just click the Scenarios button.
On the other hand, if you feel that the Euro will continue to decline against the US dollar then all you need to do is buy a Put option, which gives you the right to sell EURUSD at a pre-set strike, expiry and amount of your choice.
The screenshot below shows a EURUSD Put option with a 1.05994 strike, 7-day expiry and for €10,000 would cost $38.37, which would also be the maximum risk.
This screenshot shows the profit and loss profile of the above Put option.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.