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Fade EUR Rally As Bond Net Supply Dynamics To Improve

EUR/USD shot higher following Draghi’s calm message in the press conference.  One of the reasons for this rise is the lack of urgency to  front load bond buying.

The team at BNP Paribas  talks about fading the  bond related rally:

Here is their view, courtesy of eFXnews:

BNP Paribas favors fading the recent rise in the EUR noticing that the ECB delivered overall a dovish message, with President Draghi reaffirming the central bank’s firm intention to implement its full program of asset purchases despite recent improvement in CPI and noting recent re-weakening of data.

“However, bond markets appear to have been hoping for some reassurance that the central bank would act to address recent increases in volatility in fixed income. Draghi’s message that markets would need to get accustomed to a higher level of volatility and failing to signal that the ECB would address liquidity mismatches discussed have been the drivers of higher Bund yields and the EUR’s move higher,” BNPP adds.

“Coupled with EURUSD no longer appearing cheap according to STEER and short EUR positioning having been reduced substantially, the EUR’s latest recovery as a good opportunity to re-enter EUR shorts,” BNPP advises

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.