MUFG Research discusses EUR positioning and flags an increasing scope for correction in the near-term.
"The FT have highlighted today that sentiment towards the US dollar remains bearish. Long positioning in the anti-dollar, the euro has risen to an all-time high. The FT reported that the latest weekly data released by the US Commodity Futures Trading Commission revealed the largest net “long” position in euro futures since records began in 1999, with more than USD30 billion of positions outstanding. The extreme level of long euro positioning in part reflects current bearish sentiment towards the US dollar and increased confidence in the euro. European policy makers response to the COVID crisis including the quick agreement on an EU Recovery Fund has proved a game changer for euro performance in recent months," MUFG notes.
"We remain wary though that sentiment and positioning and has gone too far against the US dollar and in favour of the euro thereby increasing the risk of correction if current thinking is challenged more seriously. It suggests that further near-term gains for the euro could prove short-lived," MUFG adds.