Euro Continues to Slide Against Dollar as Bets on Green-Back Continue to Increase

Merav Brenner ORE

The Euro continued to decline this week against the US dollar going from an open on Monday of 1.0833 to touch a day low of 1.07082. Prior to the US presidential election EURUSD had been trading around 1.10500, it has since lost approximately 2.75%.

Most of the downward pressure is coming from US dollar bets as the market sees a Trump economic agenda as being highly likely to push up rates as the US government would need to borrow greater sums to finance the extra spending.

Add to that, political woes from various sources in Europe and the recipe is ripe. On the 4th December Italy goes to vote for a referendum to change the constitution. A win for No voters could undermine the current government and lead to early elections. The second largest party, and currently main opposition, would benefit. However, this party’s agenda involves calling for another referendum, one on staying inside the Euro.

Then on the same day there will also be a presidential election in Austria, where the extreme right wing candidate currently has a fifty fifty chance of clinching the win. His political stance towards Europe is also very skeptical as he has called various times for powers to be devolved back to Austria.

Tomorrow we have the release of important inflationary data for both the US and the Euro area. CPI for the Euro area is expected at 09:30am, while CPI for the US is expected at 01:30pm.
If you feel that the market for EURUSD may rise after one of tomorrow’s data releases then all you have to do is buy EURUSD with Deal Cancellation protection. This feature allows you to take a position and set-up a maximum stop loss, which if hit during the first hour, will cost you the premium paid to buy Deal Cancellation protection.

Deal Cancellation gives you the option to close a trade, during 1 hour, losing no more than the premium you paid, while allowing you to gain from any positive price movement. The screenshot below shows that to buy €35,000 with a stop loss of €316.12 would cost €17.96 in Deal Cancellation protection.

If the market goes up from 1.07309 you would be able to close your position for a profit less the cost of Deal Cancellation. Let’s say price rises to 1.08109, your profit would be €252.90 - €17.96 = €237.94, while your maximum risk would be €17.96 for one hour.

Author

Merav Brenner

ORE

Merav Brenner specializes in FX and commodity options and works at ORE, a leading technology company providing retail-friendly vanilla option solutions for brokers and banks.

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