StarHedgeFundTrader
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Deutsche Bank: Short Term Specs Driving Euro/USD
Deutsche Bank writes in their morning note:
It was interesting that the first theme to catch traders’ attention yesterday was the rumour that the UAE were planning to shift part of their reserves from dollars to euros. Some speculated that the diversification was already underway; some even suggested that it was already done. Our weekly EUR-sentiment Survey, however, undermined the view that any long-term flow was present in the market – from the UAE or from anywhere else. Indeed, since the start of the year, the strong link between the price swings and the ups and down of medium-term opinion rather suggest that this speculative group is responsible for the euro’s entire development. So, in the same way that medium-term ebullience hoisted the single-currency to a 1.2090 high just 10 days ago, selling by the same actors pushed it two-percent lower last week. The UAE story was little more than a lame excuse for buying the euro at the lower end of the recent range. Central bank diversification has not been taken seriously as an issue since the euro peaked at the end of 2004 (at 1.3670, we might add). And, in any case, the amounts involved would not have been too meaningful. The problem for most traders was that the only other popular topic in the market – interest rates – would rather have merited a trade in the opposite direction. Given the euro’s recent inability to sustain any decline below $1.19, this was something that most actors simply did not want to do. So they continue to hold the price in a narrow range whose upper border could already stand at 1.2005/15. At this higher level, we would attempt another bearish strategy, for target 1.1830, using a very tight, 10-tic risk-limit.
Deutsche Bank: Short Term Specs Driving Euro/USD
Deutsche Bank writes in their morning note:
It was interesting that the first theme to catch traders’ attention yesterday was the rumour that the UAE were planning to shift part of their reserves from dollars to euros. Some speculated that the diversification was already underway; some even suggested that it was already done. Our weekly EUR-sentiment Survey, however, undermined the view that any long-term flow was present in the market – from the UAE or from anywhere else. Indeed, since the start of the year, the strong link between the price swings and the ups and down of medium-term opinion rather suggest that this speculative group is responsible for the euro’s entire development. So, in the same way that medium-term ebullience hoisted the single-currency to a 1.2090 high just 10 days ago, selling by the same actors pushed it two-percent lower last week. The UAE story was little more than a lame excuse for buying the euro at the lower end of the recent range. Central bank diversification has not been taken seriously as an issue since the euro peaked at the end of 2004 (at 1.3670, we might add). And, in any case, the amounts involved would not have been too meaningful. The problem for most traders was that the only other popular topic in the market – interest rates – would rather have merited a trade in the opposite direction. Given the euro’s recent inability to sustain any decline below $1.19, this was something that most actors simply did not want to do. So they continue to hold the price in a narrow range whose upper border could already stand at 1.2005/15. At this higher level, we would attempt another bearish strategy, for target 1.1830, using a very tight, 10-tic risk-limit.
