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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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.