Top Trade Idea For February 24th, 2014 – EUR/USD

Europe was hit a ton of bad news last week. PMI reports came in weak, and the International Monetary Fund suggested that the European Central Bank cut interest rates to below zero, citing deflationary fears. All of this bad news knocked the euro off of its perch, but it bounced as it has done so many times recently. The euro remains resilient, and this is the type of behavior traders seek, whether in stocks, commodities, or currencies. Here’s the main difference between analysts and traders. Analysts see bad data, and assume that the euro will fall. Traders pay attention to the market reaction to the data, and understand that something important is occurring beneath the surface that trumps the current climate of negativity. I’m buying euro here and adding to the position on a break above 1.3830. The EURUSD currency pair has formed a large ascending triangle (blue). Despite the overwhelming negativity surrounding the currency, the resistance line at 1.3830 is the only thing standing between the euro and a new two-year high.


I’m placing a stop beneath the ascending blue line, at approximately 1.3550, and will trail stops higher if the breakout occurs.

Dollar Steady in Risk-off Trading and Other Top Forex News.

Trade in the U.S. dollar was quiet on Monday with little news out of the U.S., it was left to the other major currencies to provide direction.

It was the euro which made the biggest move, touching a session high of 1.3773 earlier in the session after the Ifo German business climate index came in at 111.3 in February, the highest level since mid-2011, up from 110.6 in January. Analysts had expected an unchanged reading.

The report noted that German firms are benefitting from high export demand, but ongoing concerns over volatility in emerging markets continued to cloud the outlook.

A separate report showed that the annual rate of euro zone inflation came in at 0.8% in January, unchanged from the previous month and slightly higher than the preliminary estimate for 0.7%. It was still well below the European Central Bank’s target of 2% inflation. Consumer prices also fell 1.1% from a month earlier, in line with forecasts.

Despite the big  move, EUR/USD ended the session unchanged at 1.3740, down from a session high of 1.3773.

The pound also strengthened against the dollar, but gains were limited by weak Chinese economic data which weighed on demand for risk-related sterling.

GBP/USD ended the session up 0.33% at 1.6669.

USD/JPY started the week quietly with little action from either side, USD/JPY ended the session unchanged, at 102.50, recovering from a low of 102.17 earlier.

Elsewhere, the Australian dollar recovered from a low of 0.89366 caused by the release of poor Chinese home price data overnight, which showed that home prices in China fell for the first time in 14 months during January. The data added to fears that the world’s second largest economy is slowing as the government tries to tackle bad loans and weak lenders.

The Aussie recovered throughout the U.S. session, breaking through the key 0.9000 level, AUD/USD ended the session up 0.70% at 0.9041.

The New Zealand dollar also recovered after this mornings poor Chinese data, NZD/USD ended the session up 0.68% to 0.8337, recovering from a low of 0.8259 earlier.

Finally the greenback slipped lower against the Canadian dollar, as the market looks ahead to key U.S. data later in the week when the U.S. is to publish revised data on fourth quarter economic growth, while data on durable goods orders and consumer confidence will also be in focus.

USD/CAD ended the session down 0.45% at 1.1060.