Update to EUR trade idea

Having looked at short exposure to the EUR on 2 November, this view seems to have played out quite well, with traders selling EUR’s across the board.

Source: Bloomberg

I suggested EUR/AUD could trade lower ( see Chris’ previous article here), with the spot trading around A$1.5450 at the time of writing. With the pair now currently trading at A$1.5270, I would personally look to lower stops on the idea to A$1.5415, although looking at the candle patterns on the daily chart we can see good bids coming in below the A$1.52 handle. A break of these bids should see the pair target the A$1.48 area, in my opinion.

One of the key questions I am asking is whether there will be less incentive for the likes of the Reserve bank of Australia (RBA) and the European Central Bank (ECB) to ease policy further given the aggressive declines in the AUD and EUR of late.

I suspect there is some truth to this, although the market is giving credence to more aggressive action from the ECB. So, in that vein, if both central banks hold off, then there could be some short-term upside in EUR/AUD.

Still, as we get ever closer to the 3 December ECB meeting, I believe we will see a new wave of EUR selling in anticipation of easing. On the other hand, the RBA will not be looking to cut the cash rate until the February meeting at the earliest, and they will specifically be looking at the Q4 CPI print (released 21 January).

I continue to hold a short bias on EUR/USD and EUR/JPY. However, there may be a better opportunity this week to sell at better levels.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.