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Apr 11 - 05:55 AM

EUR/USD - COMMENT-EUR/USD Short Position May Emerge In Wake Of US CPI

By Jeremy Boulton  —  Apr 11 - 03:55 AM

Having resolutely bet on EUR/USD rising since September 2022, traders may well sell short in the wake of CPI data that favours a widening of the interest rate differential that is weighing on the pair.

This year the interest rate gap in favour of the U.S. currency has widened from around 1.5% toward 2%, and that gap is expected to hold throughout 2024.

Traders will likely be tempted to sell short resulting in the first EUR/USD short position since September 2022 when the pair traded as low as 0.9528 EBS.

With EUR/USD currently above 1.07 - and rarely above 1.11 in the period traders have been betting on a rise - there is potential for a drop to unfold which could boost the profits of those sitting short.

In the run up to the U.S.
inflation data
, traders were still betting over $2 billion that EUR/USD would rise, but were gambling over $20 billion on the eventuality in December.

EUR/USD, which has sunk from just above 1.11 to 1.07 as the bets have been liquidated, may drop by a similar degree if a big short emerges.
A drop into the 1.02-1.04 area is between 50 percent and 61.8 percent of the 2022-2023 rise.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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