An exciting time to be trading the euro

It’s shaping up to be an eventful summer for the euro, with plenty of opportunities for short trades. Here, John C Burford examines strategies to play the single currency's impending slide.

There have been some pretty exciting developments in the euro since I last wroteabout it: The euro rallies but what now?

And the question posed what now?' was well and truly answered in spades.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Let's recap the position when I left the euro on 29 June. Here is the chart:


The market was making a potential A-B-C corrective rally right to my upper tramline and was on a potential negative momentum divergence.

Advertisement - Article continues below

I said that if the market could punch through the tramline and reach 1.4460, my target was the 1.46 area.

Later on 29 June, it hit 1.4460. And, as we all know now, it came to within 30 pips of my 1.46 target.

But that was it the market simply plunged from that rally and crashed through all of my short-term tramlines. (These are now invalid for forecasting.)

Now my 1.4460 level was acting as resistance!


The late break on 5 July punched through support at 1.4460, which indicated short trades.

It was downhill from then on, with the market reaching the 1.3850 area before bouncing.

Advertisement - Article continues below

After such a sharp move, I always like to refer back to the long-range daily chart for perspective.

Here is the chart showing my long-term tramline trio:


The market is currently bouncing off the lowest tramline in the 1.39 area to correct a very short-term oversold situation.

Short-term traders will be taking profits in this period.

Long-term traders will be holding, looking for further moves down (but using protective stops, I hope!)

Advertisement - Article continues below

But what now?

There is no question that the euro is in trouble after defying gravity for so long.

The US problems, although not insignificant (!), are pretty well known and are out in the open.

On the other hand, eurozone skeletons are emerging from the cupboard almost daily. As I write, Italy has popped into the firing line.

Bond yields are moving up a bad sign, as more euro money-printing becomes a greater possibility. That will further weaken the currency.

With this background, I fully expect the recent 1.46 high to hold for some time, and I shall be trading from the short side.

But after such a swoon, I expect sharp counter-trend rallies. I will use these to position short trades, and I will be looking for A-B-C patterns on the rallies.

Advertisement - Article continues below

This summer is shaping up to be more eventful than most.

Don't miss my next trading insight. To receive all my spread betting blog posts by email, as soon as I've written them, just sign up here .




The currencies to bet on this year

The US dollar could be set to weaken this year, while the euro, Canadian dollar and the Swiss franc could be good bets for optimistic traders.
17 Jan 2020

Welcome to Currency Corner – your weekly guide to the world’s biggest market

Forex is by far and away the biggest market in the world, with an average daily trading volume of over $5trn per day. Here, Dominic Frisby looks at th…
3 May 2019

The nature of money

The best currencies are based on a strong democracy, strong institutions and a firm attachment to both the rule of law and the protection of private p…
28 Feb 2019
Spread betting

Boeing's share price plummets: here's how to play it

Boeing shares have fallen by a third this year. But there could be worse to come. Matthew Partridge explains how traders should play it
10 Feb 2020

Most Popular


A global coronavirus pandemic seems inevitable – are markets still too complacent?

Coronavirus is going global. It’s only a matter of time before it’s classed as a pandemic. John Stepek looks at the markets’ reaction, and explains ho…
24 Feb 2020
Buy to let

Come back buy-to-letters, all is forgiven

The government is winning its war against small private buy-to-let landlords. But who benefits?
23 Feb 2020

Money Minute 24 February: house prices, unemployment and corporate results

Money Minute: previewing the week's most important economic and financial goings on, including the latest house price, and unemployment figures, and …
24 Feb 2020

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019