The Euro is steady, rising by 0.1% as it stabilizes around 1.16. A bullish trend persists, even though it is losing some momentum. Attention is on the upcoming ECB meeting, where rates are expected to remain unchanged. However, short-term rates hint at a possible 25 basis point cut by the end of the year. Preliminary PMI data forecasts slight drops in manufacturing but minor growth in services.

Technical Indicators

The RSI is near 50, showing that the Euro is consolidating around 1.16. Medium-term support is at the 50-day moving average of 1.1510. In the near term, the market seems to be trading between 1.1550 (support) and 1.1680 (resistance). This information serves as a forward-looking statement and carries risks and uncertainties. It’s important to do thorough research before making financial decisions, as you could face risks, including the potential total loss of your investment. No personalized advice is provided, and the author and source are not liable for any errors or losses linked to this information. This article does not serve as investment advice and does not create a business relationship with the companies mentioned.

Range Bound Strategies

We view the current stability of the Euro, around 1.16, as an opportunity for range-bound strategies. With the noted decrease in bullish momentum, traders might consider selling volatility rather than betting on a specific direction. This could mean utilizing option strategies like short strangles or iron condors in the near term. Traders should closely monitor the upcoming European Central Bank meeting. The market currently sees over a 70% chance of another rate cut by year-end, but recent inflation data remains high, standing at 2.8% for May. A surprising hawkish stance from the ECB’s President could upset the current stability and challenge range-bound strategies. We believe the economic data suggests a solid foundation for the trading range. Recent flash PMI data for May indicated the Eurozone composite index is at a one-year high, fueled by a strong services sector that is balancing out the downturn in manufacturing. This economic context supports the medium-term support level at the 50-day moving average. Historically, the current environment mirrors the months leading up to the ECB’s policy pivot in 2022. Back then, the currency pair also traded in a tight range before experiencing a significant breakout when the bank’s intentions became clearer. This suggests that while selling volatility is favorable now, traders should stay alert for a potential swift change in price action. From our viewpoint, the technical range between 1.1550 (support) and 1.1680 (resistance) serves as the current framework for derivative positions. The one-month implied volatility for the currency pair is currently below 6%, close to its yearly low, showing that the market may be complacent before the meeting. We recommend that traders set up their positions to take advantage of this quiet period while managing their risk in case the central bank’s guidance shifts unexpectedly. Create your live VT Markets account and start trading now.

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