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Euro Holds Steady...and Presents Buying Opportunity?


By the time something becomes front page news the story is already priced into the market. Greece and the Euro have been absolutely everywhere later. Is the Euro decline done? How knows, but here are a few things to keep in mind. Right now Euro FX Futures (6E) are holding pretty steady.

With the all the doom and gloom Euro talk one would think the Euro has been sinking to new lows rapidly. That's not the case. The low in September Euro futures occurred back in March at 1.0494; it currently trades at 1.1076. Right now it is offering some low risk opportunities to the upside.

Since early in the year the price is moving in a large triangle pattern--basically a price range that is narrowing. There is also a smaller triangle pattern which commenced in mid-April.

Figure 1. September Euro FX Futures - 4 Hour Chart

Right now the Euro is trading near the rising trendlines which create the bottom part of the triangles. The price has also, so far, stayed above the last major swing low at 1.0837 from May. If the triangle continues the Euro has room to move up to 1.1350 to 1.14 without market conditions changing. If conditions do change, and Euro moves into an uptrend (breaking above the top of the triangle), the profit target extend out to 1.22. This profit target is based on adding the approximate height (rounded down) of the small triangle to the breakout price.

Consider buying near 1.1050 to 1.0990, with a stop loss below 1.09. Risk is 0.015 (based on worst entry), with reasonable profit potential of 0.03 to 0.041, depending on entry and initial target. If the triangle breaks to the upside, the longer-term profit potential is 0.114...which is many times the risk. Depending on the price action around 1.1350 to 1.14 that area could also present a shorting  opportunity (deal with that when the times comes).

Of course the Euro could drop. Trade is about taking calculated risks, not being right all the time. If it drops our stop loss helps control the risk and then short trades can be considered if the market sets up for it.

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