Summary
- EUR/USD has enjoyed a revival over the past two weeks, largely based on optimism that Greece will successfully secure additional aid to finance it through 2012 and possibly 2013.
- We agree that financing will likely be found for Greece, but the exchange rate is once again repeating past mistakes of not taking account of the downside risks posed by the peripheral story, which remain varied and considerable.
- The pull-back in EUR/USD has provided an attractive level to enter fresh short positions, but we prefer participating through options, paying up for the enhanced staying power, but cognisant that implieds are relatively high (also compared to the VIX index).
- Buy 6W (14 July) 1.4450 EUR/USD put with knockout at 1.3930 for 0.275% EUR amount, using 1.4455 spot reference (indicative).
CREDIT AGRICOLE
CORPORATE AND INVESTMENT BANK