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May 23 - 06:55 AM

EUR/USD - COMMENT-It's Not Too Late For EUR/USD Traders To Take Profits

By Jeremy Boulton  —  May 23 - 04:45 AM

It's not too late for EUR/USD traders to take profits on their bullish positions, but it is probably sensible to do so.

The tide is turning on a very bullish market that has invested over 25 billion dollars on a EUR/USD rise.
Only 2020's uptrend led to a bigger bullish position than this year's and in 2020 gambling was spurred by the enormous spending that was intended to mitigate the ill effects of lockdown but also fuelled a great deal of gambling that resulted in some huge moves.

This year there is no massive stimulus to support gambling - indeed the withdrawal of stimulus resulting from a global tightening cycle is cause for caution.

Instead, traders have gambled buying EUR/USD on the prospect of a narrowing interest rate gap between U.S. and the Eurozone, but a gap of almost 2 percent remains, and the quietening of FX markets evidenced by the big drop in volatility is reason to respect the gap.
The longer traders wait for a move the more cash they will lose due to interest rates.
Losses already this year are roughly 1 percent.

EUR/USD trapped within a rough 1.05-1.11 range this year has recently dropped from the peak of the range towards its centre, shortly after traders added to longs - buying high and risking losses.
There is a growing risk of a drop towards 1.0500.

There are many other traders sitting profitably long and hoping for a move that looks increasingly unlikely.
There is never a bad time to book a profit, but this may be one of the better ones

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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