dynamiquebd

STARS ALIGNING FOR THE EURO

Long
FX:EURUSD   Euro / U.S. Dollar
Looking at the yield spread between the German 10-year and US 10-year bonds, the Euro may be undervalued giving more potential to the upside. Though the correlation between the prices of EURUSD and the bond spreads may not be perfect, in hindsight we have seen prices trail this phenomenon.

Asset managers and hedge funds have been placing big bets pushing net long positions in favor of the EURO by 12% since June. However, this bullish sentiment for the Euro may already be signaling an over-crowed market as exposures reach bullish extreme levels. The sentiment for the Dollar has been diminishing on the negative impacts of the virus. We have seen 90% reduction in Net long positions since the beginning of June. We have also observed a bearish extreme signal as net long contracts reach all time low. The dollar index is reflecting the perception of large speculators given the sustained decline in the past week.

EURUSD technical setup see prices above the monthly highs of May @1.1139. We would expect support to hold at this level for further push to the upside. A 30-year seasonality cycle may also support the bullish play for the Euro . EURUSD rest above the 200 EMA on the daily time frame.

In our opinion, any improvements in the daily incidents of the virus may invalidate the bearish outlook for the dollar
Trade active: Lets see if we can shoot for the stars. I recently stumbled on data that literally shows banks' positions in various asset class
Comment: Good trade! price tracking Bond yields. Note that Seasonality for the pair is bearish. while paying attention to Monthly high of June 2020. We have seen price reverse sharply
Trade closed: target reached: target reached

Comments

It was a good analysis, thank you
Reply
@maanii, Many thanks
Reply
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