Could this be an optimal time to short EUR vs going long USD?
This is the type of actionable trade idea that our subscribers get pretty much every single day.
There’s always something that our volatility dashboard uncovers…
Let’s dig in ☟
➠ HOW DID WE GET HERE?
σ EUR has gained as the regional banking crisis in the US has worsened recently.
Eventually, leading to Wednesday’s halt in the D’s rate hiking cycle.
However, the ECB continues to combat inflation and upholds a hawkish position.
But for how long?
➠ WHERE DO WE STAND TODAY?
σ The DXY is at critical monthly support.
While the Fed confirmed a pause to rate hikes, and markets are now factoring in a pivot.
It’s worth pondering what additional positive news could boost the EUR from here.
➠ WHAT COULD CHANGE THINGS?
σ Downside risks for EUR are accumulating.
The China reopening story is losing steam, oil prices appear to detect an impending global recession, and policymakers tend to make policy errors.
Moreover, EUR’s long positioning has reached extreme levels.
➠ EUR VOLATILITY DASHBOARD
σ Let’s take a look at our proprietary Vol Dashboard for EUR to see what we can take away for possible trade entries.
𝟏 ❯ Purchasing puts seem sensible due to the extended spot prices and low volatility.
𝟐 ❯ Opting for a September expiry is a smart move – it provides sufficient time for currency fluctuations to occur.
𝟑 ❯ Our position benefits from a flat term structure since we avoid substantial premiums when extending the expiration date.
𝟒 ❯ Employing the FXE ETF in US-listed options for a directional trade effectively convey our perspective.
𝟓❯ In my opinion, Puts on the September expiry with the right strike offer a compelling risk-reward balance.
𝟔 ❯ This creates manageable time decay & enhances the appeal of this trade.
Overall, it offers a potentially attractive risk-reward scenario in the current market setting.
☞ Find the full details of this FXE Trade Idea in Today’s Macro Options Daily ☜
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