Where to Sell EUR/USD

Where to Sell EUR/USD

Where to Sell EUR/USD

Between the ECB talking about more Quantitative Easing and the Federal Reserve set to raise interest rates, the EUR/USD should be trading lower. However over the past week we have seen steady to consistent gains in the currency pair and selling EUR/USD at current levels can be risky. Next week is an extremely important one for the financial markets because the Federal Reserve will decide whether the U.S. economy is strong enough to warrant the first rate hike in 9 years. Based on the performance of the U.S. economy alone the Federal Reserve should raise interest rates because the unemployment rate has fallen to a level often associated with full employment. Wages are on the rise, the housing market is steady and manufacturing and service sector activity is expanding. The emergency conditions that warranted the zero interest rate policy is no longer in place and in turn, it is time to raise interest rates. However the Fed does not operate in a vacuum and between the volatility in international equities, the dovishness of the ECB, and the dovish bias of other central banks, it will be difficult for Janet Yellen to pull the trigger. As a result of this uncertainty, investors could further reduce their exposure to long dollar positions ahead of Thursday’s rate decision, leading to gains in EUR/USD. Also the risk is to the upside for the German ZEW survey and Eurozone trade balance. Therefore we believe that the best place to sell EUR/USD is higher near 1.1400.

Technically, the EUR/USD is trading in a wide range with 1.1467 being upside resistance and 1.1087 near term support. One of these levels could be tested this coming week and break would expose the currency pair to a bigger move.

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