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Dec 05 - 06:55 AM

EUR/USD - COMMENT-EUR/USD Hedging Strategies Should Factor In Uncertainty

By Jeremy Boulton  —  Dec 05 - 04:45 AM

EUR/USD hedging strategies should factor in the uncertainty that likely follows the abrupt end of a major trend and the period of consolidation as traders wait for fresh information that will either see the trend resume, or a new one emerge.

The adjustment of an extremely overcrowded USD long position has seen a surge of roughly 1000 pips since September, a big move but still only accounting for roughly one-third of the prior decline.

With fewer longs to pare and speculators now betting heavily on a EUR/USD rise, the correction may lose steam.
A substantial drop in option vols is indicative of the emergence of a consolidation phase.

Quieter markets may see EUR/USD settle within a 500 point range with the bulk of trading within a 300 point zone, for example, 1.03-1.08 with greater volumes inside 1.04-1.07.

This range could vary by one or two cents but shouldn't be higher than 1.0800 which would suggest a much larger rise, or below parity which would likely reaffirm the downtrend forcing traders back to positions they only recently abandoned.

Yuan's change of direction is having a big influence

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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