News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • If you'd rather watch a market video rather than US Presidential debates - or whether I gauged the market aftermath correctly - you can watch my trading video for what matters Wednesday here: https://www.dailyfx.com/forex/video/daily_news_report/2020/09/30/SP-500-and-Dollar-What-Comes-After-the-Presidential-Debate.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/IJLPRQNM2R
  • 🇨🇳 Non Manufacturing PMI (SEP) Actual: 55.9 Previous: 55.2 https://www.dailyfx.com/economic-calendar#2020-09-30
  • 🇨🇳 NBS Manufacturing PMI (SEP) Actual: 51.5 Expected: 51.2 Previous: 51 https://www.dailyfx.com/economic-calendar#2020-09-30
  • Here we go #PresidentialDebate2020
  • Heads Up:🇺🇸 Presidential Debate due at 01:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-09-30
  • Heads Up:🇨🇳 Non Manufacturing PMI (SEP) due at 01:00 GMT (15min) Previous: 55.2 https://www.dailyfx.com/economic-calendar#2020-09-30
  • Heads Up:🇨🇳 NBS Manufacturing PMI (SEP) due at 01:00 GMT (15min) Expected: 51.2 Previous: 51 https://www.dailyfx.com/economic-calendar#2020-09-30
  • What are some key points post the US Presidential debate? Get your key highlights here with @ZabelinDimitri at 10:30PM EST here: https://t.co/XV0y5M8KLT https://t.co/PUTq6kOjxt
  • Although recent polls suggested that Joe Biden is leading, the odds that Donald Trump may again defy the preconceived forecasts still exist. Remember he is Trump. And thus a face-to-face debate is worth traders’ precious time. Live TV show begins in 50 mins.
  • Dow displayed a bearish trading pattern overnight: 7 out of 9 sectors in the red, with 86.7% of the index constituents ending lower. Energy, materials and industrials were among the worst performers, while healthcare and consumer discretionary struggled to hold small gains. https://t.co/hI957NZRLr
Euro Short Covering Underway, but Long-term Outlook Still Bearish

Euro Short Covering Underway, but Long-term Outlook Still Bearish

2015-03-22 21:00:00
Christopher Vecchio, CFA, Senior Strategist
Share:
Euro Short Covering Underway, but Long-term Outlook Still Bearish

Fundamental Forecast for Euro:Neutral

- The stage was set for EURUSD short covering, and the Fed decimated the US Dollar mid-week.

- The retail crowd’s penchant for selling the Euro is proving to be a reliable contrarian indicator.

- Have a bullish (or bearish) bias on the Euro, but don’t know which pair to use? Use a Euro currency basket.

The FOMC meeting proved to be the powder keg it was hyped up to be, helping spark a massive EURUSD short covering rally that produced the biggest single-day rally in over three-years. EURUSD closed the week up +3.00% at $1.0814, after setting fresh yearly lows at $1.0458 on Monday. With a build in Euro short positioning among future market speculators ahead of the FOMC meeting – to 193.8K net-short contracts for the week ended March 17 – there’s been and remains plenty of tinder to keep EURUSD elevated in the near-future.

The rapid build in short positioning ahead of the FOMC meeting brought the market back in line with the extreme positioning seen in early-February (196.3K net-short contracts for the week ended February 3), right before a month-long consolidation developed in EURUSD. Now that the Fed has essentially changed the goalposts on raising rates – pushing the likelihood of the first rate hike for either October or December, per the federal funds futures contracts – the weak data coming out of the US provides good reason for the massive net-long US Dollar position to be unwound.

Even if the short EURUSD position is unwound, the Euro viewed in isolation is still a weak currency fundamentally. Bond prices across the region continue to rise, with yields in Germany negative out to 7 years right now. The 5-year German bund yield closed the week at -0.11%, while 5Y5Y inflation expectations came in at +1.760%; as yields fall and inflation expectations rise, Euro-Zone based investors will be forced to seek yield outside the region, thereby exchanging Euros for foreign currencies in order to invest in higher yielding foreign assets.

Over the next few weeks, EURUSD may not offer the best opportunity for seeing weakness in the Euro; that could go to the commodity currencies, which have had historically strong end-of-March trading sessions per QE-era seasonal studies. Allowing more time for the market to recalibrate to the Fed’s new goalposts and the US economy to move through early-Q1 data (which has been deplorable, even recession-like) will most likely be the best path forward in EURUSD. –CV

To receive reports from this analyst, sign up for Christopher’s distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES