The euro has made noticeable gains against the U.S. dollar over the last week, appearing to be on the rebound after hitting a new recent low on March 2nd. The EUR/USD bottomed out at 1.0866, and now stands up over 1.103, as of Tuesday morning. The trend is upward for the moment, but traders need to be cautious here, particularly because even the professionals are saying that this trend is likely to be short lived. Let’s take a quick look at why they think this, and what a good course of action could be.
The trend for a week is still considered to be a micro-trend, and not indicative of the long term outlook of the currency pair, but for short term traders, especially those that look at 15 minute binary options and shorter, even this might be too long to give you an accurate portrayal of the pair’s relevant movement.
Even with the several days in a row that have been logged with gains, analysts believe that short term traders should be bearish on the pair until the 1.1050 mark—the standing resistance point—has been breached. We’re still several pips away from that point, so each trade needs to be evaluated on a case by case basis, complete with heavy technical analysis. For now, it seems that the fundamentals still do weigh in favor of the U.S. dollar, but no one is really confident just how long this will last.
In a weird twist, part of the reason why analysts believe that the euro is rising is because of the negative trade news coming from China. This is the same thing that has been credited for partially taking away the euro’s stability in previous reports. Because the Chinese economy has taken an unexpected negative turn fundamentally after showing signs of recovery, investors are beginning to turn toward safer investments, and right now, the euro is one of the safer places to hold your money if you live within the EU. Even after all of the news and reports saying that the Chinese market was creating a strong USD, there’s also a lot of demand for the euro, and this has helped to not only keep the USD’s price in check, it has helped stabilize trade between the U.S. and Europe, giving the euro the current upper hand between the two. This may not last long, but it is the current situation.
Traders looking at the EUR/USD should not focus on long term perspectives right now. Short term trades are best when levels of uncertainty like this occur. The consensus sentiment is bearish on the pair even if the trend is bullish at the moment. There are still opportunities for profits here, but your timeframes for your trades need to be toned downward. If you usually keep trades open for a few hours, you should be looking at half an hour or less. If your trades are typically open for an hour, you should scale down to below 15 minutes. The more you limit your exposure, the better, as long as you have taken steps to prevent risk while doing so. If you risk $100 per option you execute, for example, scaling this in half will help you to alleviate that risk. Times like this can be frustrating for traders used to churning out a certain number of trades or a certain amount of dollar turnover per day, but it’s far better to risk less and still have respectable profits than it is to keep plugging along at the same rate, but losing money instead of earning it. Changes to your strategy are necessary once in a while if you want to keep being successful.