Is the runaway EURO long ripe for reversal?

Thursday 8 February 2018

Readers will know that the key driver of USD weakness (and AUD strength) this year has been the market charge into EUR chasing interest rate forwards. This has supercharged the US boom with a falling currency, amplified by rising oil and more shale activity.

I don’t have anything specific to add that might change this trade. This is a speculative post. However, there are some reasons to consider a reversal is in the offing.

In market positioning terms, the EUR trade is very stretched. CFTC positioning is extremely bullish (at records in fact):

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.