Why Targeting 1.20 in Euro-Dollar Makes Sense: Spectra's Donnelly
- Written by: Gary Howes
Image © Adobe Images
The euro just hit a new four-year best.
The euro to dollar conversion could be on course for 1.20 says a veteran FX market trader and analyst.
The call is made by Brent Donnelly, formerly a trader at HSBC and now head of research at Spectra Markets, on the day Euro-Dollar prints a new four-year peak at 1.1845.
He says EURUSD is looking "particularly" interesting around here and that further gains should be anticipated.
The momentum comes on the back of another big USD drawdown, which looks to be largely driven by positioning ahead of the midweek Federal Reserve meeting, where a 25 basis point cut to the Fed Funds rate is anticipated.
When considering whether it's worth chasing the move higher, Donelly interrogates the EUR/USD chart going back to late 2020.
Image courtesy of Brent Donnelly at Spectra Markets.
He finds a couple of pointers worth considering:
"First, we are close to testing the 3-year high as the last time we traded above 1.1827 was September 2021. We traded 1.1827 on July 1 of this year and that is the current cycle high.
"Second, you can see that 1.1900/10 was the last series of tops before the collapse due to the energy crisis and Russian invasion of Ukraine.
"Third, note the major tops at 1.2200/60 and the spike high of 1.2350 in early 2021.
"Finally, see how each leg of the current rally has been close to 7 big figures.
And what does this all amount to?
"If we project 7 bigfigs from the 1.14/1.15 bottom in late July, we get a target of 1.21 or 1.22. So, if I was doing year end bullish EURUSD trades, I would buy 1.20 and sell 1.23 strikes," he says.
