vlad.adrian
Short

EURUSD - Correction definately over

FX:EURUSD   Euro Fx/U.S. Dollar
853 16 12
This is a follow up for my previous chart. I am still a huge bull on the dollar. The rumors about a Greek deal managed to push the Euro             lower, a classic buy the rumor sell the fact type of trade. During this correction, the Euro             shorts were heavily trimmed according to CFTC.

All planets are aligned for a dollar surge. Now that the Greek drama is over, all you have left is a somewhat hawkish FED that gets good data from the economy, and an ECB that is pumping 60 billion per month into the economy. Why would you not short the Euro             and buy the dollar??? I invite you to comment, I am curious if anyone has a positive scenario for the European currency.
Placed these with a 75% tp:
Potentially falling to the location signaled by the arrow.

snapshot
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Borrowing Euros is cheap. It's a known cost. Easy to place elsewhere. So Euros keep getting bought
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that would make the euro fall, not rise :P
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aaahmed12 vlad.adrian
i thought when a product is in demand, the price for it increases. same for currency, if the euro goes up as pezq is assuming, the euro's should go up right?
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If we talk strictly about carry trading and not something else, you go loan Euros, and then you have to convert them into another currency, hence euro goes down. Carry trade involves 2 pairs, the one with low interest rates will go down and the pair with higher interest rates will go up.
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aaahmed12 vlad.adrian
an appreciation in the currency to be more technical about it
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fash aaahmed12
The demand and subsequent appreciation might be true if the supply was limited...but in the case of the euro it is not (60 billion created per month).
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No it's not about demand, it's all about the carry which involves two pairs.
+1 Reply
pezq vlad.adrian
You are an American hedge fund and you borrow a billion euros (swapping your dollars). You then invest your euros somewhere else with a higher return. This causes the dollar to fall against the Euro. What happens when you invest those euros somewhere else depends on what you invest in
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You've got it all wrong I'm afraid.
In order to borrow euros you do not need to convert your dollars, that is why it is called borrowing, then you go with your euros to another country and you exchange the whole amount to that currency (I don't know if you can do that without exchanging to dollars first, but it doesn't really matter in this case) hence the euro goes down. There are many articles about carry trade on the web.
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