Chart of the Week : Trader positioning in the euro Chart of the Week : Trader positioning in the euro Chart of the Week : Trader positioning in the euro

Chart of the Week : Trader positioning in the euro

Forex
Christopher Dembik

Head of Macroeconomic Research

Summary:  Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.


Click here to download this week's full edition of Macro Chartmania.

This week, we look at trader positioning in the euro. These are the main highlights from the CFTC Positioning Report:

Extreme positioning in the euro remains at place. EUR shorts are now close to their historical lows, at 52K contracts while, on the opposite side of the road, EUR longs are still close to their highest annual level, at 230.6K contracts. The positive mood surrounding the single currency is prevailing in the FX market despite risks related to the second COVID-19 wave currently hitting Europe. Many traders are still betting on a faster economic recovery in the euro area than in the United States. 

The prospect that the ECB could also review its bond purchases in the APP program by adding more flexibility to issuer limit and capital key, as revealed by the Financial Times over the weekend, could also continue to fuel positive sentiment towards the euro. The large political endorsement of the ECB policy ahead of the Karlsruhe ruling has been viewed by many market participants as the signal that the central bank has almost unlimited firepower to support the economy and won’t be constrained in the future by legal considerations. 

In the short- and medium-term, positive sentiment is likely to continue to dominate but, as mentioned by our Head of FX Strategy John Hardy last week in his daily FX updates, the EURUSD “has to build a lot of further energy to pull clear of the 1.1900-1.2000 zone that has capped the action for about six weeks now”. Said differently, the currency cross might continue to evolve in a narrow range comprised between 1.1800-1.1900 in the coming sessions in the absence of real market movers. 

The recent appreciation in the euro area exchange rate has been viewed by many economists and analysts as hindering the economic recovery in the monetary union but if we look at the fair value of the euro, by referring to the REER (Real Effective Exchange Rate), the single currency is still undervalued by more than 21% versus the USD. Therefore, we think it is rather unlikely that the ECB will really try to talk down the euro in the coming months, even in the case the single currency would keep moving upward. We are not even close to high risk area in terms of exchange rate level.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992