Last we Monday we wrote that Credit Agricole initiated a long position in EUR/USD from 1.2660 with a target at 1.3100 and a stop of 1.2350.
They reiterated the position today:
This week’s main focus will be on PMI releases, which are unlikely to indicate improving business activity.
However, considering there is limited scope of the ECB turning more dovish anytime soon, we expect investors’ ECB rate expectations to continue stabilizing. This is because more time is needed in order to evaluate the latest policy measures impact on the economy.
This combined with still elevated speculative short positioning suggests the single currency will stay subject to position squaring-related upside risk, in particular against the USD.
It must be noted that there may well be additional scope of moderating Fed monetary policy expectations. According to 5y forward breakeven rates, price expectations remain close to multi-month lows. This combined with weakening global growth expectations may prove sufficient for enabling a more dovish policy stance by the Fed.
As a result to the above outlined conditions we remain long EUR/USD as a trade recommendation.
The risk/reward in the trade doesn’t seem properly skewed but they went against the crowd on the EUR/USD long call and they’re about 130 pips in the money — not a bad start.
EURUSD daily
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