The Euro is starting to percolate as the risk on trade is back in vogue in the currency markets, and a short squeeze could be in the making. The Commitment of Traders reported showed that short positions in the Euro reached an 52 week high, and could create a quick exit for the door.
The euro managed to extend yesterday’s high and currently trading just above 1.291, which also happens to be a key level of resistance. A convincing break would open the door to test the recent high near 1.307. Recent debt sales in the euro zone have gone fairly smoothly. The French 8 billion sale is of note, being the first one since it lost its AAA rating from S&P. As further evidence that the ratings agencies remain behind the curve, French borrowing costs actually fell. A similar dynamic was seen after the US lost its AAA last summer. Spain was also able to sell EUR 6.6 billion of debt at lower borrowing costs.
The Euro has declined in a very smooth pattern without a significant reversal, but has now broken out above trend line resistance. A close above 1.3085, will likely lead to a quick test of 1.3210.
The trade – purchase a daily binary call option on a daily close above 1.3085, with a cap at 1.3150.
Summary
Asset : EUR/USD
The trade : Binary Call Option
Expiry time : End of day
When : On a daily close above 1.3085, with a cap at 1.3150.
Result : out of the money
