Euro vs the Dollar: The story remains the same

George Kessarios

George Kessarios
Chief Economist & Fund Manager

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Analyst Insights, Tuesday, 28th of September, 2020

The recent rally of the EURUSD pair from 1.08 to 1.20 was the biggest in over a decade. Usually, when any currency has such a run, it is for a reason. Also, it’s natural that after such a run, any pair will give some back. But the question is where the pair is going and not where it’s been. 

We have been following very closely Fed swap liquidity for a while. If we look at the current figures, we see that swap liquidity has been unwinding and currently stands at around $32 billion. In other words, the need for dollars from central banks around the world is almost non-existent at the current time. 

Another piece of information that might provide insight into where the pair is going is COT data. The weekly Commitments of Traders from the Commodity Futures Trading Commission.

Please note that as of the latest data last Friday, Net speculative long Euro positions are still the highest they have been in over a decade. 

The bottom line is that nothing much has changed in my stance on the Euro. Overall, I still favour it vs the dollar. However also please note the trend is your friend, and in this market, things can change in the blink of an eye.

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