The champagne is on ice, the parity party awaits

A burst of dollar strength pushed EUR/USD to just 5 pip above parity. Although the move appears to be on the back of rising yen, which is now the strongest major currency of the Asian session. The yen is stronger following comments from Kuroda, saying that inflation is likely to increase in pace. EUR/USD has been caught in the crossfire between dollar and yen strength - as EUR/JPY has fallen more than USD/JPY today it has taken EUR/USD down with it.

A move down to parity has been floated on and off over the years, but now it is close to becoming a reality. But I’d be surprised if it simply gave way with its first test of 1.0000 in nearly 20 years. And I strongly suspect there’s a plethora of buy-limit orders around the parity level, with stops just below – and that makes a technical argument for an initial bounce. Of course, the risk here is that if prices do break below parity it could trigger some large stops and send the market lower. Whichever way it breaks, it will be a key focal point for traders in the European and US sessions.

If EUR/USD breaks today it could prompt some volatility, trigger poorly placed stops and initiate fresh sell orders. There’s technical support levels around 0.9984, then the 0.9939 – 0.9950 zone. But overnight implied volatility rose to 18.89 annualised, which is roughly +/- 1.19% either side of parity. And demand four puts (downside protection) has also increased, so traders are seemingly bracing themselves for a rough ride today. Whichever way it breaks, it could make for a lively session.

Euro explained – a guide to the euro

How to trade with City Index

You can easily trade with City Index by using these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.