1.4340-50 breaks under the strain
After a quiet day yesterday due to various Holidays, the key 1.4340-50 level in EURUSD was finally breached overnight in Asia, triggering stops and some early European buying.
This move higher has not been a complete surprise given the extent of shorts that built up in recent weeks.
The question now is wether this is simply a short term squeeze. The answer will possibly lie in the behaviour of longer term investors in response to this recent strength.
1.4340-50 should continue to be short term pivotal, but would expect the level to hold initially on dips.
Once again, of all the EUR crosses, EURJPY had an “amplified” move higher, 115.63-117.27, as a result of EUR strength and JPY weakness combined.
Sentiments & Views
A word of caution for today: Month end flows will have a significant influence today, and we are likely to see somewhat disjointed price action and moves, as each pair copes with these flows.
– Bullish EURUSD.
– Cautiously bullish USDCHF after failing below 0.8500 and suibsequent poor CHF GDP data.
– By default bullish EURCHF also.
– GBP Neutral. Being more vulnerable than most to month end flows, prefer to wait for European close.
– AUD Neutral. Another that is vulnerable tomonthend flows and one we prefer to “wait and see”.
– USDJPY. Missed the opportunity to buy this. We do not appear to be alone in having missed this judging by early European price action.
Core
– Long EURUSD
– Cautiously Long USDCHF and, by default, EURCHF. Small long, looking to add on dips.
– Neutral in other pairs, awaiting for month end flows to unfold.
UBS Investment Bank