EUR/USD (1.3605) Although there was widespread market concern about the outcome of the current deliberations between the Greek government and the IMF/EU/ECB, there wasn’t much in the way of news. Consequently the euro settled unchanged on the day. The problem for the single-currency in the eyes of traders, however, remains that they still have no reason to buy it. Even if there is no worsening of eurozone sovereign debt crisis, the euro still suffers from at least the appearance that US policymakers are working more furiously on their challenges than their European counterparts.
Selling the euro at the current prices is also difficult for some shortterm players. Bear in mind that many were already short one week ago near current levels and they were squeezed out during Thursday’s upswing. To re-instate these short engagements on Monday, after the market had ‘gapped’ lower, is not something they would have done willingly. So we suspect there are there are markedly fewer shorts in the market. Indeed, today’s bears should be principally those who did not change their positions as the euro roared beyond $1.39 last week. Such tenacious sceptics are unlikely to have their take-profit orders anywhere near current levels. We therefore believe that the best bids will be much lower, probably at 1.3360 or at 1.3210. These levels represent the current risk.
Market Bias Index
For the first time since the SNB intervention, the CHF is no longer the euro cross-rate with the greatest bias. The yen is now likely to be seen as more overvalued than the franc is undervalued.
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Deutsche Bank
Fixed Income Research – Global