30 Jul 2013
Flash: Risk of a positioning squeeze in summer markets - SocGen
FXstreet.com (Barcelona) - The market is likely to approach key entry points in the long USD, short EUR and JPY trades as we head into August, notes Sebastien Galy, FX Strategist at Societe Generale.
Key Quotes
"The market is already positioned for this and hence sadly at risk of a positioning squeeze in summer markets. Multiple risk events this week suggest implied vols should stop falling given the underlying risks."
"We are getting closer to the point of being short outright EUR on a broader basis. For that we will have to wait for the Fed decision as the EUR still offers a better risk reward than the USD. A dovish Fed might be able to further dampen expectations of tapering. We would then be left with a weaker USD ahead of NFP and steady sign that the US economy is slowing but steadily inching in the right direction."
"Technically, EUR is on the edge of a break lower vs NOK, SEK and JPY with 100 day moving averages in focus. Ahead of German elections on Sept 22 and a decision by the German constitutional court, the ECB may be constrained to forward guidance this week, with some calls for the publication of ECB minutes."
Key Quotes
"The market is already positioned for this and hence sadly at risk of a positioning squeeze in summer markets. Multiple risk events this week suggest implied vols should stop falling given the underlying risks."
"We are getting closer to the point of being short outright EUR on a broader basis. For that we will have to wait for the Fed decision as the EUR still offers a better risk reward than the USD. A dovish Fed might be able to further dampen expectations of tapering. We would then be left with a weaker USD ahead of NFP and steady sign that the US economy is slowing but steadily inching in the right direction."
"Technically, EUR is on the edge of a break lower vs NOK, SEK and JPY with 100 day moving averages in focus. Ahead of German elections on Sept 22 and a decision by the German constitutional court, the ECB may be constrained to forward guidance this week, with some calls for the publication of ECB minutes."