EURUSD has started the week at new highs, reaching a peak of 1.3234 at the Asian open before paring back below 1.3150. This buoyancy comes in spite of fresh sovereign credit downgrades on Friday evening where Fitch lowered the rating on five European countries by at least one notch. The most notable targets on this occasion were Italy and Spain which were reclassified two notches lower, and Belgium which dropped one notch. The latest IMM positioning report revealed that speculative short euro positions hit another record high last week. Rather than the recent rally above 1.3000 denting bearish sentiment, it appears investors are merely viewing it as an opportunity to reload short positions at more attractive levels. We think this could be the perfect recipe for an uncomfortable squeeze higher, as deeply entrenched negative sentiment is confounded by excessive short positioning. We therefore take a cautious view on new short entry, unless there is some new development from Greece that can justify such a move.
Elsewhere during the Asian session, equity markets have had a tough start to the week with many bourses in the region suffering losses on the day. The Nikkei is down -0.5%, Hang Seng -1.3% and Shanghai Composite -1.5%. Gold has pared back some of its recent gains and headed back towards $1725 levels, but we still remain at relatively elevated prices while Greece’s negotiations remain unresolved.
Today’s economic calendar includes a host of German regional CPI figures for January, along with Eurozone consumer confidence, and the US PCE for December. Of greater focus however, is likely to be the outcome of today’s scheduled Italian debt auction – where a strong showing from investors could prompt the EURUSD to rally sharply.
By
Elsewhere during the Asian session, equity markets have had a tough start to the week with many bourses in the region suffering losses on the day. The Nikkei is down -0.5%, Hang Seng -1.3% and Shanghai Composite -1.5%. Gold has pared back some of its recent gains and headed back towards $1725 levels, but we still remain at relatively elevated prices while Greece’s negotiations remain unresolved.
Today’s economic calendar includes a host of German regional CPI figures for January, along with Eurozone consumer confidence, and the US PCE for December. Of greater focus however, is likely to be the outcome of today’s scheduled Italian debt auction – where a strong showing from investors could prompt the EURUSD to rally sharply.
By
M.Zohaib Gadit
Forex Trading Consultant
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