What’s next for the euro? Dip buying?

The euro sold the fact on the victory of Emmanuel Macron. What’s next? Here are two opinions, putting the common currency against different counterparts.

Here is their view, courtesy of eFXnews:

EUR: 2 Challenges N-Term & A Period Of Choppy Trading: What’s The Trade? – SocGen

Societe Generale FX Strategy Research’s first reaction following yesterday’s victory of  Emmanuel Macron in  the French Presidential election was  that EUR would likely see a wave of profit-taking on long positions.

Today, SocGen follows on the EUR reaction noticing that  the single currency faces two short-term challenges.

“The first  is that the FX market has moved a good way further in recent days than the bond market, with the Treasury/Yield spread not very different from where it was when EUR/USSD was under 1.08. Bunds need to catch up with the currency.  The second  hurdle is positioning. CFTC data show the smallest speculative Euro short in 3 years. That’s still a short position, of course, so much more of a short-term hurdle than a reason for a deep correction to lighten positions.

As such,  SocGen expects a period of EUR choppy trading for now, but still expects EUR/USD to move higher in due course.

Strategy-wise,  SocGen still  likes  long EUR/JPY positions to EUR/USD and EUR/GBP at this stage.

EUR/JPY is trading circa 123.80 as of writing.

EUR: Stay Constructive M/T & Buy Dips: What’s The Trade? – Credit Agricole

Credit Agricole FX Strategy Research notes that the EUR failed to hold on to its initial gains, regardless of Emmanuel Macro winning French elections by larger than anticipated margin.

In that regard, CACIB argues that  from the current levels it will depend on other factors such as further stabilizing ECB monetary policy expectations to drive the EUR.

“As we take a more constructive medium-term stance on the ECB,  we believe that dips in the Euro should be bought, for instance against the GBP. We see scope of diverging monetary policy expectations to the benefit of the cross,” CACIB argues.

In line with this view,  CACIB went long EUR/GBP* on Friday.  

EUR/GBP is trading circa 0.8441 as of writing.

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