EUR\/USD has experienced moderate losses but remains above 1.1850, hitting a four-month high earlier. German IFO data shows unchanged business sentiment, while US-Japan intervention fears put pressure on the USD. Concerns over possible intervention in the yen market have led to lower USD demand, maintaining high levels for EUR\/USD since last September.<\/p>\n
Recent US interest rate checks on the Dollar-Yen suggest impending market intervention, causing a retreat in USD positions. The Greenback’s decline impacted the EUR\/USD, reaching levels not seen since September. Nonetheless, the Euro faces resistance below 1.1875 amidst a risk-off environment, influenced by erratic trade policies like Trump’s threat to impose tariffs on Canada.<\/p>\n
The economic schedule is light, with attention on the European Central Bank’s speech and the US Durable Goods Orders report. Data expectations indicate a 0.5% recovery from a previous 2.2% drop. Technical indicators show bullish momentum for EUR\/USD, yet caution is advisable as the pair nears resistance, with potential support around the 1.1800 level.<\/p>\n
In other economic news, German IFO sentiment stayed flat, missing slight improvement expectations. Durable Goods Orders, released by the US Census Bureau, are sensitive to large investments, the next release being due on 26 January, with a consensus forecast of a 0.5% increase.<\/p>\n
Given the persistent weakness in the US Dollar, we are looking at opportunities to maintain or enter long EUR\/USD positions. The primary driver is the significant market fear of a coordinated US-Japan intervention to support the Yen, which is forcing traders out of long dollar bets across the board. The current level near 1.1860 is a four-month high, signaling strong upward momentum for the pair.<\/p>\n
The main event risk in the coming days is the Federal Reserve’s policy decision this Wednesday. Market pricing, reflected in Fed funds futures, currently indicates a more than 90% probability that the Fed will hold interest rates steady this month. Therefore, we will be scrutinizing the policy statement and press conference for any hints about the timing of the first potential rate cut in March or the second quarter.<\/p>\n
However, a note of caution is warranted for today, as the upcoming US Durable Goods Orders report could provide a short-term boost to the dollar if it beats expectations. A stronger-than-expected reading, combined with the technically overbought RSI signal, could trigger a temporary pullback in EUR\/USD. This makes it risky to add aggressively to long positions ahead of that data release.<\/p>\n
For traders already holding long EUR\/USD positions, buying put options with a strike price around the 1.1800 level could be a prudent strategy. This acts as a hedge, protecting profits from a potential downturn caused by a hawkish Fed or strong US data, while still allowing for upside participation. The cost of the option is a small price for securing gains at these multi-month highs.<\/p>\n
Given the high level of uncertainty surrounding both the Fed and potential intervention, we see increased volatility as a near certainty in the coming weeks. A long straddle, which involves buying both a call and a put option with the same strike price and expiry, could be an effective way to profit from a large price swing in either direction following the Fed’s announcement. This strategy is ideal for a market where the direction is unclear but a significant move is expected.<\/p>\n
We must remember the sharp, sudden market moves caused by the Bank of Japan’s intervention back in late 2022, which taught us how quickly currency trends can reverse on official action. This historical precedent makes holding outright short positions on the Yen, and by extension long USD positions, exceptionally risky right now. Using options allows us to define our risk in a market environment where sudden, high-impact events are a distinct possibility.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD holds firm above 1.1850 amid USD weakness, intervention fears, bullish momentum, and upcoming data.<\/p>\n","protected":false},"author":62,"featured_media":17027,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40134","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/40134","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=40134"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/40134\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17027"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=40134"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=40134"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=40134"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}