It shows the euro/dollar has been flirting with the $1.49/1.50 barrier for the third time since late November. Since hitting $1.49 on Nov. 23, the euro tested that level on Jan. 15 and most recently on Feb. 1. Will the third time be the charm for a move to $1.50?
“I’m not impressed with euro/dollar trade above $1.49,” Coleman says. “It is not able to hold those levels.”
Coleman points to the presence of heavy barrier options at the $1.50 level.
“When there are barrier options clustered at a particular level, it is usually a range trading sort of structure,” he says.
Coleman also notes the psychological significance of the $1.50 number.
“It is one of the big round numbers — markets love them,” he says. “They tend to have a magnetic effect on price.”
However, he says there is a lot of two-way action around big, round numbers. Near term, Coleman sees the potential for a quick rally through the $1.50 barrier, but he does not expect it to be long lasting. His advice: Take profits on the approach of $1.50.
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