EUR/USD traders have been buying this year and then watching the pair fall, leaving them badly positioned for the downside break that has unfolded nL1N2AE041.
That has significantly increased the chance of a steeper sustained decline.
Traders were misled twice.
First, the year-end flow triggered a rather big rally from 1.0981 to 1.1240 between Dec.
24-31 -- from the base of the range then to just above its peak.
For a time, speculation about the end of Swiss National Bank intervention led to heavy selling of USD/CHF.
EUR/USD traders interpreted that as continuation of the year-end rally.
They were wrong.
As is so often the case, year-end flows were one-off.
EUR/USD topped in early January and fell.
It took weeks for traders to reestablish the positions they began with.
A week after they achieved that status quo, EUR/USD has broken lower.
Traders are doubtless shorter, but at worse levels.
Near-record-low vols suggest option traders are poorly positioned and economists think EUR/USD is going up nL4N2A42BQ
EUR/USD: Click here