The inflation news from the Euro zone was higher than expected, which will continue to put pressure on the ECB to raise interest rates, already expected to hit 4.5% in the short term. That should make the EUR/USD take off to the upside. What we are getting instead is a softer reaction with some mild movement. Part of that weak reaction may be due to the fact that US TIC data was released today, showing higher than expected demand for US securities and bonds from foreign buyers. That should increase the value of the USD and taken alone, should send the EUR/USD to the downside.

What do we do with such contradictory news? In this case, a miserable dilemma for the central bankers may be a nice options trading opportunity. As a trader, I am often faced with uncertainty about what direction the market may move but a higher level of confidence about where it won't move. In today's video, I will illustrate a current FX options trading opportunity on the EUR/USD with a short straddle. This trade takes advantage of a channeling market and will pay a larger return the close the market stays to the mid point of the trade. That setup may be the perfect way to take advantage of a channeling EUR/USD in the short term.

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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."