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USD: Short USD Positions Are Finally Beginning To Be Cut Back; What Does It Mean For EUR/USD? – SocGen

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What is the outlook for EUR/USD in the near-term?

Here is their view, courtesy of eFXdata:

Societe Generale Research flags a scope for further EUR/USD downside on the back of positioning adjustment in the near-term.

Short dollar positions are finally beginning to be cut back, which is a necessary condition for further weakness but also a testing period, since the dollar will either trade sideways for a bit longer, or go up. In 2018, cutting back EUR/USD longs took EUR/USD from 1.25 to 1.14 before a big EUR/USD short then took it further. Dollar bears will now have their mettle tested,” SocGen notes.

“A week ago EUR/USD was testing the top end of its range. Now it’s testing the bottom end, dragged lower. by these yield and rate moves, not to mention the contrast between how the Fed and ECB talk about the economic outlook… That should see the euro find some support before too long but, this morning and maybe this week, there is no doubt that the momentum is with the dollar and against the euro,” SocGen adds.

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