Trading the Euro? Seize the opportunity!

Now here's a good one! Whether you trade the Euro in Forex or the FXE Euro currency spider - you have a big trade opportunity lying ahead! At the moment, under the current circumstances, the Euro is cheap, very cheap. Hovering around $1.30 this currency pair gets a huge buy rating from me. Although it dipped in the $1.29 territory I foresee great potential for this trading vehicle, with a target set to 1.34 by the end of the year. Here's how I came to this conclusion.
First and foremost, the Dow Jones - currently trading in a sideways direction, indicate that the global markets are correcting themselves, given the fact that the VIX is down almost 8% in the last 5 days. European markets are down, but not by much, I've seen this scenario many times before - usually this indicates the 'calm before the bull run' that I expect to see next week. Asian markets are slightly up and are probably right on the same track next trading week which would be considered a continuation of the global recovery.

It's not all so 'doom-and-gloom' as the major business news sources let us believe. Those news sources are driven by sensational news and what is more sensational than negativity?
Besides, when it comes to the Euro, honestly - what is the alternative? In the short term there really isn't one. It looks like Europe is going to be stuck with the currency for awhile, whether they like it or not. The major economies in Europe already announced that they would do everything they can to 'save the Euro'. And it makes sense. They really don't have any other choice. What else are they going to do? Revert everything to the way it was before the Euro was introduced? That would cost such a tremendous amount of money that wouldn't be even thinkable at the moment. (I say at the moment since this is a short term trade).
But why is the Euro trading this low all of a sudden? Obviously people traded an enormous amount of Euros in for something else. Again, panic - that isn't really there. News about printing more Euros - Europe will fall apart - ECB doesn't do enough etc. etc. etc. It the panic had some foundation to it, it would show in the global markets and especially it would show in the VIX which is nicely showing at a comfortable 24 and then some. Not bad considering the current economic climate.

Now, from the fundamentals to a technical stand point to back up my trade setup; I marked the points with circles,

First, the RSI rebounding from oversold territory, in combination with the MACD. Below that is the Bollinger Band Width Average which is already rebounding. The blue line marks the highest and the lowest point in the past quarter.


Buy the Euro around where it is trading now and set a target price of 1.32 or in my case 1.34 (if you're willing to take on a little more risk). In either scenario the Euro will rise from the 1.30 levels next week.

Dow ends day above 12,000 points - now what?

It was a great day for stocks. The Dow gained almost 500 points due to news about the central banks willing to cooperate to fix the global economy, job creation and better business activity. The question always arises after a huge jump like this, where do we go from here. After all, the VIX (volatility index) is still trading pretty high - and what about the Euro? At the end of the day - something's gotta give, or what goes up most come down, right?

Above is the chart of the Dow Jones Industrial of today. Stock exchanges elsewhere in the world, except for Asia since they were closed when the news broke about the central banks working together to lower borrowing costs.

Whether or not this trend will continue we have to look at the daily chart of today. The velocity of the increase in volume and they way the chart looks we can see a continued trend. I would normally say, that it is time to sell off after such an increase but this trend may continue.
However, how many analysts in these past couple of days were bearish on the Euro Dollar. I personally went bearish with the EUR/CAD (announced on my twitter when I did), the only cross currency trade I've ever made - really!
But where to go next after a big jump like this? Do stocks continue to rally or is it time to short some equities?
Although Bank of America (BAC) did very well today I still don't trust financials, and stay away from them like the plague until this whole mess with Europe is resolved.
My usual ETF spiders have been very profitable - like the SPY - QQQQ and the Diamond (DIA). But once again Oil is over a hundred bucks a barrel, usually this slows rapid growth in the Dow Jones down.
Last but not least - the Euro trade, the overall sentiment for this pair is 50 -50 which makes it really hard to gauge whether or not you should buy or sell the Euro against the US Dollar. For this Forex trade you would have to take on more risk, for me I would be still very bearish on the Euro. I personally think the overbought currency hurt the Euro Zone as a whole. The ECB made a big mistake not to lower the rates so trading with Europe would be a little cheaper. After years of letting it go on like this, countries like Spain, Italy, Greece, Ireland, Portugal and now even Belgium are dealing with high unemployment and a huge deficit. So eventually those guys at the ECB should realize there is something wrong with the current system. When that is going to be, no one knows exactly - all I know is when there is a spike in the EUR/USD - I'm short or I'm short in the FXE - the currency ETF that tracks the Euro performance.

A closer look into the FXE, a must BUY! ETF option analysis

I love these moments in the market. I'm excited about this one! A sudden drop or spike in price always means opportunities in my book. Especially when it comes to trades I'm following and familiar with. In this case I'm talking about the Euro. The sudden drop in price to the 1.42 levels in the past few days had me keeping my eyes open for entry trading opportunities. And I think one came along.
For currency traders it's the EUR/USD, to gain a few pips here, I definitely recommend a BUY position here with a target of 1.44.
For my own portfolio, I'm going with the ETF EURO Currency Shares Euro Trust, a.k.a FXE.

In my case I chose the FXE1121E141, the 21st of May 11 Call Option on this one. Based on the fact the Euro almost rallied to 1.50, and suddenly pulled back almost 8 cents and now is rising in value again indicates, the markets are correcting and upwards pressure is continuing to built up. Regardless whether or not the oversold RSI is not yet in its recommended territory (at least not on this chart) I'm jumping in early, purely based on historical analysis on this pair, I've been following the EURO trade for years and it's not the first time I've seen such a drop or spike in price moment, sometimes completely unrelated to technical indicators, but mainly fundamentals that toss around price movement.

Follow up post to come,...

BTW, Silver trade (SLV) turned out beautifully... :)

Approaching the Euro trade

Just as the Wall Street Journal wrote an article two days ago about the Euro steadily rising to $1.50 according to some professional analysts, the opposite happened instead. Aggressive selling of the Euro against the dollar occurred due to worries of the European debt crisis.
I've been monitoring this trade closely from the beginning of the month (read previous posts) and speculated that sooner or later the currency pair was bound to drop (finding a bottom), and found it interesting that most investors were so optimistic about the Euro, even though Portugal, Greece, Spain, Ireland and Italy are in some serious trouble. It didn't make any sense to me, and indeed the 'expected' (to me) happened. A little later then anticipated but it happened. The value of the Euro dropped over 1.35% in a matter of a week. High volatility means an increase in risk, but also an increase in money making opportunities.
Now is the time to look for a market bottom. A sharp plunge like that likely means an major upswing is brewing. And in a trade like this, like with any trade you want to get in when the price is low.
If indeed the majority of the analysts are bullish on this trade, and given the fact that the US Dollar continues to weaken and a possibility of a downgrade in the credit rating of the S&P from AAA status. Also, most technical indicaters are hinting towards a strong buy, it's time to buy the Euro, or take a bullish position in the FXE trust. (if 1.50 is a target, 1.42 seems a bargain to me)

The Elliot Wave seems to forming the 4th wave, with a target of 1.45.

Trouble in the middle east and Japan? Markets don't seem to care.

This is one some of the strangest trading weeks I've ever had. I usually post some of the higher probability trades once in awhile on the blog, but due to lack of market direction I really can't come up with any.

What is up with the markets?

A lot of things have been going on in the world, turmoil in the middle-east, Japan's radiation leak, a severely over valued Euro and the markets show no sign of fear (VIX), rather a smooth recovery, in fact the VIX hasn't traded so low in a long time. The Dow Jones Industrial Average seems to be trading sideways now, so it's hard to be bullish on anything, is there a global collapse in the near future? Or are we going to continue to see positive numbers? One of the main reasons is, despite all the negative news that has been going lately in the world, is that companies are hiring again and the people that filed for unemployment dropped, making the unemployment rate drop a nice 0.1%.

Will this be enough? Obviously, collapsing governments and rebellions against the existing governments in the middle east doesn't seem to affect the global markets and economy. To me, this can only mean one of two things either;

A: Once the markets settle down (how it's trading sideways right now) the anxiety will kick into a lot of investors, wondering why the markets aren't pulling back as much as they show 'under normal circumstances' which will make the market move lower and pressure will build on the VIX and the markets,

or B: Trouble in the middle-east is viewed as 'nothing new' and the global economic recovery will steadily continue.

Regardless, the VIX trading at these low levels under the current economic situation is quite baffling to me.

This week I'm keeping a close eye on and being bearish or bullish on;

• VIX (VXX) ▲ is bound to trade higher by the end of the week. Target at 19.
• FXE ▼ The overheating Euro is bad for the European economy and intervention is highly likely. Target set at 1.400.
• SPY ▼ for May @ 130 Put
• QQQ ▼ for April @58 Put
• DIA ▼ for Arpil @ 120 Put

A quick glance at the VIX so far, incredible, especially with all that has been going on;