After the euro surged through a critical technical level last week, analysts who study charts to help guide their predictions are looking back to 2010 for perspective on how high it could rise.
Europe’s common currency traded at about $1.18 Tuesday, holding above the key $1.1714 mark that it breached July 26 for the first time since August 2015. The euro is coming off a five-month rally, its longest since 2013, propelled by interest-rate differentials that have gone in its favor and broad dollar weakness.
The 19-nation currency still has room to run, according to analysts at Canadian Imperial Bank of Commerce and JPMorgan Chase & Co. They point toward $1.1877 and $1.2043, the euro’s lowest levels of 2010 and 2012, respectively, as technical levels that loom as near-term targets. The options market shows that traders are gearing up for more euro strength, with demand growing for calls, which give the right to buy. Credit Suisse and Credit Agricole are among banks that have raised euro forecasts in recent weeks. Credit Suisse upped its 12-month call to $1.22 from $1.15, while Societe Generale said that a jump to $1.20 is possible in coming months.
That said, euro bulls are full of confidence. Risk-reversals, a measure of demand for euro calls relative to puts, are around an eight-year high for three-month tenors, a period that includes the next Federal Reserve and ECB meetings. And euro net longs are hovering around the highest since 2011 among hedge funds and other large speculators, Commodity Futures Trading Commission data show.
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
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