Bought EUR/USD half unit at 1.1087

Bought EUR/USD half unit at 1.1087

 

Positions

Short one unit NZD/USD at 0.6833; s/l 0.6928

Long half unit EUR/USD at 1.1087; s/l 1.0963; t/p 1.1355

 

Comment

Conscious of digging myself into a hole this year on trading,  I have taken only a half position size (after already recalibrating my position size recently).  This position would be equivalent to only a quarter of last year’s trade size.

This is another example where EUR has already moved, and market positioning is now long EUR.  As such, this trade does not tick all the boxes.

However, EUR has consolidated for a lengthy period since the first French election, with a wobble after the second, before now breaking above its recent range.  As such, it may be exhibiting a more durable up-trend.

It has risen above its average since the ECB first implemented QE in January 2015, and may now be pointing towards testing the high side of the range (around 1.15).  The key psychological level of 1.10 is close to that average which is also near the high side of its recent consolidation.  As such, we may find it now consolidate above this level.

EUR may seem high compared to the JPY, but the end of QE is not in sight in Japan, so EUR/JPY could rise back to its levels that prevailed when the ECB first implemented its QE (toward 135).

Equity flows may be driving EUR, and many commentators believe they are better valued than the USA.

Eurozone economic momentum remains robust and political risk has faded.

US economic reports are mixed, recent inflation data were softer, Trump policies remain highly theoretical and he continues to stumble through controversies, delaying progress.

I remain short NZD.  However, confidence in this position is not high at this time.  Broadly speaking, I like NZD lower as its narrowed yield advantage, and risks associated with housing markets and China may eventually push it lower.  The dovish attitude of the RBNZ may help keep NZD down, but we may need US yields to start rising again to resume NZD fall.  I am not sure there is a catalyst for this in the near term.