E Taking Profits On Our FXE Put Spread

We’ve got another big win here, picking up a nice 12.50% in just 5 trading days.

We have captured 91.66% of the maximum potential profit in the Currency Shares Euro Trust (FXE) May, 2016 $113-$116 in-the-money vertical bear put spread.

Time to take the money and run. This way we cut our currency risk in half and have dry powder with which to reenter the position at a later date.

If you have the ProShares Ultra Short Euro ETF (EUO), the 2X short Euro fund. Keep it. The Euro is going lower.

As you make recall from out original trade alert, our reasons for selling short the Euro last week were somewhat complicated.

While the April nonfarm payoll report was a bit of a disappointment, It still was in the same ballpark of 200,000 a month we have been seeing for the last several years.

That means the economy is speeding up, not slowing down, and that interest rate hikes will happen sooner, and not later. The Q1 mini recession is now behind us. The dollar should rise and the currencies should fall.

The Currency Shares Euro Trust (FXE) March, 2016 $103-$106 in-the-money vertical bull call spread is a bet that the Euro won’t rise above $113 by the May 20 expiration.

In other words, the (FXE) would have to run up to a new one year high within ten trading days for us to lose money on this trade. I turned out to be correct in my assumptions.

Now that the market has thrown out any chance of a Fed rate hike in June, the capacity for the dollar to disappoint has burned out. Futures markets are only pricing in a 15% probability of such a move.

On top of that, the dollar has been strong for the past seven consecutive Mays. I ascribe this to the large numbers of international trade transactions that settle this month, which generate a lot of dollar buying and foreign currency selling.

This is against a backdrop of foreign governments looking to weaken their own currencies at every opportunity.

Look for someone in Japan to say something very negative next week when they return from the Golden Week vacations. For them, the yen at 107.00 is nothing short of the apocalypse for their economy.