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.

EUR
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.

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