FxWirePro Call Review: Euro bulls gains strength in short-term; book short side profits

In March this year, we have called on our readers to go short in the euro, at the then current rate of 1.218 against the USD with a target of 1.17 area. https://www.econotimes.com/FxWirePro-Call-Review-Euro-short-term-outlook-revised-from-bullish-to-bearish-targeting-117-1178120 and in follow up reviews, here https://www.econotimes.com/FxWirePro-Call-Review-Maintain-short-positions-in-EUR-USD-ahead-of-ECB-1275745  and here, https://www.econotimes.com/FxWirePro-Call-Review-Maintain-short-positions-in-EUR-USD-target-revised-lower-1315385 we have extended the target to 1.145 area.

As the troubles continue to cast clouds over Eurozone outlook, we urged our readers to maintain short positions in the Euro citing the following troubled and extended our downside target from 1.145 area to 1.095 area.

• U.S. President Donald Trump’s trade challenge.
• Additional demand for payments to NATO by the United States.
• Italy’s clash with bureaucrats in Brussels over immigration and austerity after new populist leaders came to power in Italy.
• Angela Merkel’s struggling attempt to maintain chancellorship amid a threat by coalition partner to quit or impose harsh immigration policy if she fails to find a common resolution to the problem.
• Uncertainties surrounding Brexit.
• Growth is slowing down, along with PMI numbers.
• Both consumers and business confidence are crashing.

However, in July, we warned that “our latest calculations suggest that the pair (eur/usd) remains trapped in a Bull/Bear fight over future direction. While the Bears are looking to push the euro towards 1.095 area, the bulls are targeting 1.205 area. The bears need to break below the 1.15 support area to negate the bullish pressure.” https://www.econotimes.com/FxWirePro-Short-term-Outlook-Euro-trapped-in-Bull-Bear-fight-against-USD-1401076

And our latest calculations suggest that the bulls have gained significant strength in the short-term and they are now targeting 1.225 area against the dollar. Moreover, the chart above shows that once again, the exchange rate is diverging away from the interest rate spread, which is significantly negative for the USD in the short run. 

Trade idea:

We would like to urge readers to book profit (480 pips) on short positions at the best rate possible. However, we are not abandoning the 1.095 target area as it is a longer-horizon target. We believe better entry opportunities would be there.

A higher euro against USD seems to be the most likely outcome in the short -term.