Having been waiting since Monday to sell the Euro in a volatile market I finally made a trade on Friday buying Euros for a few pips. It was clear that the Euro was being defended the whole week probably by BIS due to hedge funds rebalancing with month-quarter end flows and downgrading Greece by Fitch. On the chart (a channel) we can see a straight move to the downside from highs which indicates a liquidation of Euro-longs. Now I expect EUR/USD to consolidate at current levels and continue the trend to the downside.
However, BNP Paribas believes the liquidation of USD positions so far has largely been confined to shorter-term market participants and momentum traders, while Longer-term oriented macro accounts are unlikely to have capitulated on their high conviction USD views. As such, BNPP advises its clients in its weekly note to 'stick to the plan' and keep reselling EUR/USD rebounds. Here is BNPP's rationale behind this call along with the details of its recent short EUR/USD position. Eurozone investors are likely to remain sellers of the EUR on rallies. In line with this view, BNPP maintains a short EUR/USD from early this week from 1.0990 with a target 1.04 and a stop at 1.1165.