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Risk event for the week starting Monday 11 July: German ZEW; US CPI

With recent declines in EUR/USD, Daily FX's Nick Cawley wants to find a better price to enter a short position. Nick also looks at German business confidence and US inflation data which could disturb the trade.

(Video Transcript)

Short EUR/USD

Welcome, let's take a look now at a Risk Event for the week starting Monday 11th July.

And for this, we're now off to DailyFX to be joined by Nick Cawley. Nick, good to catch up with you. I know you're going to be talking about the EUR/USD.

As we are recording at the moment we are still awaiting non-farm payrolls (NFP) data, but I know this Risk Event is focused as well on next week's trade. Explain more about your thinking around this EUR/USD proposition.

Yeah good morning to you, Jeremy. There are a couple of, sort of, fairly big economic prints early next week which could affect the value of EUR/USD.

As you said, we have non-farm payrolls coming up today. But next Tuesday, we have the latest look at the ZEW readings for the Eurozone and for Germany, and they're expected to be even weaker. They did improve marginally last month, but in July, the numbers are expected to turn further negative, a euro negative.

And then on Wednesday, we have the latest look at the latest American inflation, the US CPI, which is expected to nudge a tickle higher.

EUR/USD chart

So the trade that I'm looking to do is I'm looking to go short EUR/USD, but I'm finding it difficult at current levels.

If you look at the daily chart, what we can see here is that when we had a technical break of the $1.0340 level, which we saw on Tuesday, we saw quite a sharp reaction. And now $1.0340 becomes fairly solid resistance. So what I'd be looking to do is I'd be looking to try and get a short of the EUR/USD around one of these events, either the NFP today, ZEW on Tuesday, or CPI on Wednesday, around the $1.0280 level.

If we get a bounce back to around the $1.0280 level, get a short in there, I'd have a stop-loss around the $1.0360 level. And my target would be parity as I think parity is still very much on the cards for EUR/USD.

Interesting proposition that, Nick. Very, very briefly, a lot of people now beginning to talk about parity. Is there a sort of a magnetic attraction, do you think, to this possibly now?

Yeah, I do think there is. And I think that you will probably get some quite interesting price action as you get to parity as well. As you say, I think that there has got this magnetic attraction. And yeah, I think quite a few people are geared up for this move and I do believe it's likely. We'll have to see what happens.

Nick, thanks very much indeed, have a good weekend. That's the Risk Event for the week starting Monday 11th July.


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