EUR / USD up 70 pips today
The euro today surpassed yesterday’s high at 1.0975, but stagnated before 1.1000 and the May high at 1.1018. The graph shows the same type of range and triple top formation as a number of assets. Some – like the AUD / USD and the SPX – burst temporarily and this could be the fall of the dominoes.
Here is the view from JPMorgan’s London FX office:
Yesterday, the euro jumped to 1.0975 at the start of our session, only to see it spend most of the rest of the session on the defensive, battling what appeared to be a newly created very short term positioning spillover . With robust equity markets in general and a macro community largely short of the euro, even without news from Merkel / Macron, a moderate and temporary upward correction would have been understandable, but the announcement of the fund’s proposal aid of 500 billion euros has accelerated this process. . – There is still a lot of skepticism about the fact that the 27 EU countries will agree on this proposal, which grants grants, not loans, according to needs in the region, but its possibility aroused an element of optimism. Meanwhile, reopenings continue to advance, so far with no big surprises. This contributes to the sentiment of the stock market, although I think the market chooses to see the glass half full just about everything right now. This was evident yesterday, as a major doubt was cast on the legitimacy of the data published by Moderna concerning the results of vaccination tests. Although the major markets have sold a little on this subject, they have since rebounded somewhat. This type of price action has been typical recently and makes us want to stay biased towards a short USD position, at least for now. The euro really didn’t feel good for much of yesterday and the 1.1000 / 20 is a very important level, so I’m back on the sidelines there after a tactically bullish day. I would point out that the asset managers were buyers of the euro yesterday, and if we see a persistence of this type of flow in a context of short specs that are still abundant, I would consider going back to a long tactic. I also continue to like short positions on USD against other currencies like RUB and MXN. For the euro, 1.0910 / 20 is the area to watch below, followed by 1.0870 / 80. As mentioned above, the upper focus area is 1.1000/20. A break and a closure above the latter would put additional pressure on the shorts.