Euro Ready To Rally?

Euro Ready To Rally?

If you are looking to place a trade in the currency markets, you might be wondering if it is a good time to look at the Euro.  To be sure, the commonly traded currency has been caught in a bear market for the last two years.  But currency values can only travel in one direction for so long and the real question at this stage is whether or not the shared currency is likely to start rallying after posting its long-term lows.

From a fundamental perspective, there is still an argument to be made for a weaker Euro.  Economic problems persist in areas like Spain, Portugal, and Greece and there is still little indication that these negative trends are actually changing course.  So until this is seen, we will likely continue to hear market analysts suggest the region might be stronger if one or more of these countries leave the monetary union.  Further research in these areas has been conducted by Ultimate4Trading.

Placing Euro Trades

So on the one hand, we have a positive technical view in that we have a deeply oversold currency pair.  But on the other hand, the fundamental still looks fairly negative.  So it will be a bit more complicated when looking at the proper ways the Euro should be traded.  In cases like this, technical analysis tends to work better than fundamental analysis because chart-based positioning tends to gives us much better entry levels.  

From the long-term perspective, it makes sense to look at the major psychological levels when trading the EUR/USD.  We are likely to see a good deal of buying once we move into the 1.10 level, and then again at 1.05 and ultimately parity if markets are able to travel that far.  Prices are still heavily oversold in the pair and even if we continue to see prolonged weakness in the region’s economic data, it will be hard to argue against long positions in Dollar-denominated pairs like the EUR/USD.  Confirmation of the stance will be seen if markets are able to make a clear break of 1.1640.

About the Author
Richard Cox is a university teacher in international trade and finance. Lessons in macroeconomics and price behavior in equity markets. Trade ideas are generally suggestive of time horizons of one to six months.

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