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Dec 04 - 12:55 PM

EUR/USD: Betting Against The General Consensus; Going Short EUR/USD Via Options - Danske

By eFXdata  —  Dec 04 - 11:30 AM

Danske Research recommends going short EUR/USD via 6M seagull at zero cost.

"We generally see short-term indicators as being stretched long in e.g. positioning and the ‘recovery trade’-narrative is quite consensus by now. Thus, the surprise potential appears to be for the downside in EUR/USD, just like in 2018," Danske notes. 

"We suggest to go short EUR/USD via a seagull - betting in the direction of the trend from a tactically stretched position and taking advantage of the decline in volatility and cheap wings. We choose to go short spot via a 6M seagull (long tenor, known worst case) as we do recognise it could take a few months before markets decide for a new story and Q1 could propel us a bit higher still. Key risks to this trade include a renewed, strong reflationary momentum and/or that European macro is stronger than we anticipate," Danske adds. 

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Source:
Danske Research/Market Commentary

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