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Dec 02 - 07:55 AM

EUR/USD - COMMENT-EUR/USD Traders Should Consider A Drop To Parity

By Jeremy Boulton  —  Dec 02 - 06:17 AM

When parity gets a mention, currency pairs usually head in the opposite direction, often swiftly.
Currently no one expects EUR/USD to drop that far, which is why EUR/USD traders should consider it.

In contrast to big speculation and bearish forecasting for moves to and below parity in the past, EUR/USD traders have stubbornly retained longs throughout a large decline, and when economists were last polled by Reuters they expected a rise.

Should EUR/USD drop below 1.0863, a fraction of the decline from 1.2135 since June, techs would target the multi-decade low at 1.0340, and a move under this year's low at 1.1186, which is 61.8% of the rise from 2016's 1.0340 low to 2018's 1.2556 peak, may provide the spark.

The $2 billion staked on a drop in November compares to $15 billion bet on a fall when EUR/USD reached 1.1105 in June 2019, and 26 billion in January 2015 when EUR/USD first dropped below 1.1100 on route to 1.0457.

The proportions of betting reached during those risk-averse times could be eclipsed in the current environment, where stimulus supports gambling and sharply diverging ECB/Fed policy weighs. nL8N2SM1K0



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Source:
Refinitiv IFR Research/Market Commentary

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