These Problems Create A EUR/USD Trading Opportunity

Chinese market turmoil is back. China began the year with a devaluation of its currency, shaking financial markets across the globe, with the S&P 500 down since the start of the year.

Brent Crude closed last Friday at its lowest level in 12 years, and continued pressure is likely to force Central banks globally to lower their inflation forecasts.

The EUR/USD, meanwhile, is showing increased demand for the Euro due to its safe-haven status.

Trading Opportunity

A stronger EUR/USD is creating a short- selling opportunity, as the Euro could fall back down for several reasons.

• Firstly, when the market peril cools back down eventually, all the safe- haven bets on the Euro will unwind.
• Secondly, the ECB is likely to characterize a more dovish attitude.
• Moreover, the ECB severely disappointed the markets on the December 3rd meeting, as the Quantitative Easing program was not expanded by as much as the market expected. This caused the EUR/USD to shoot up, exactly the opposite of what the ECB is aiming for.

Hence, the ECB is likely to use this meeting to set a more dovish tone and push the EUR/USD lower by any means. Whilst the EUR/USD may further strengthen as the market turmoil continues, it could make sense to go short the pair.