The Euro lost 86 pips last Friday going from an open of 1.12403 to a close of 1.11545; over the past two days it has failed to recover any grounds as the markets get set up for the possibility of further interest rate hikes.
In fact the Euro plunged last Friday against the dollar as comments made by Ms. Yellen at the Jackson hole meeting reverberated throughout the market place as she seemed to many to be hinting at further interest rate hikes before year end.
The Federal Reserve Bank is scheduled to hold their next Federal Open Market Committee meeting tomorrow at 7pm with a state of the economy report, there will also be a press conference at 7:30pm. Most calls are for the central bank to leave interest rates unchanged, although two Federal Reserve primary dealers, Barclays Bank and BNP Paribas have both made statements where they believe an interest rate hike could already come at tomorrow’s meeting.
A lot of volatility could arise if there were a surprise hike, but there could also be a lot of action depending on how Hawkish or Dovish Ms. Yellen’s speech is. Increased talk of an imminent interest rate hike should send the Euro plunging further, whilst statements that may lead to interpretations of delay should see the Euro rally higher.
If you believe that the market for EURUSD will fall after the FOMC meeting and press conference then all you need to do is sell this pair with Deal Cancelation protection. This feature allows you take a position and set a maximum stop loss, which if hit, during the first hour, will only cost you the premium you paid to buy the Deal Cancellation protection.
Deal Cancellation gives you the option to close a trade and cancel deal during 1 hour, losing no more than the premium you paid, while allowing you to gain from any positive price movement.
The screenshot below, with the trade screen, shows that to sell €35,000 with a stop loss of €313.43 would cost you €20.31 to gain Deal Cancellation protection.
If the market moves down from 1.11652 and decreases to 1.10652 you would be able to close your trade for a profit, less the cost of Deal Cancellation protection. Your total profit for the trade would be equal to €313.43-€20.31 = €293.12, with a maximum risk for one hour of €20.31.