Euro's Rally Eyes 2015 High as Traders Reload Long Positions

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Nomura's Hafeez Sees Trend of Euro Moving Higher

The euro eyed its 2015 high as bets the European Central Bank will start unwinding its stimulus plan combined with broader U.S. dollar weakness to prompt traders to reload their long positions.

The common currency, already at the strongest in almost two years, climbed to as high as $1.1677 in London on Friday, approaching August 2015’s high of $1.1714. Fast names are adding to their long positions on the euro having trimmed their exposure heading into the ECB meeting, said a London-based trader, who asked not to be identified because they are not allowed to speak publicly. The euro is also benefiting as investors assess whether an investigation into the U.S. president may stall his economic agenda.

Strategists and technical analysis suggest the currency may extend gains toward that 2015 high. On charts, the medium-term objective is seen at $1.1736-$1.1806, which is the 38.2% Fibonacci retracement of the 2014-2017 selloff and the 200-week moving average. Stop losses are poised above $1.1750, according to a trader in London.

The euro’s 1.5 percent climb this week was supercharged on Thursday as Draghi said that the central bank will discuss in the autumn any plans for tapering quantitative easing. While that took the currency’s 2017 advance to almost 11 percent, some analysts are looking for more gains, with Credit Agricole SA strategists including Valentin Marinov boosting their six-month forecast for the currency to $1.18 from $1.12 after the meeting.

“A QE-taper is inevitable,” they wrote in a note to clients.

Euro Rally Shows Few Signs of Stopping as Draghi Appears Unfazed

  • Bloomberg Dollar Spot Index down 0.7% this week, set for second weekly loss
  • The Australian dollar slumped the most since May after Reserve Bank of Australia Deputy Governor Guy Debelle dampened expectations for policy tightening and flagged concern about a stronger currency
    • AUD/USD plunges as much as 1%, most since May 3

— With assistance by Sejul Gokal

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