The euro’s fastest rally in 15 years is gathering momentum, with traders betting it will rise to $1.20 and strategists scrambling to update their forecasts.
The economic uncertainty caused by the US tariff policy has raised doubts about the traditional safe-haven status of the US dollar, and the European common currency, the euro, reached its highest level in three years over the weekend.
According to data from the Depository Trust & Clearing Corporation (DTC), three out of every four options contracts bought on Friday were aimed at further boosting the euro. Traders said that hedge funds were targeting a euro-dollar exchange rate of $1.20. Mizuho International strategists believe that the possibility of the euro-dollar reaching that level (the highest since mid-2021) in the coming months is on the rise.
Jordan Rochester, head of macro strategy for Europe, the Middle East and Africa at Mizuho International, said: “The foreign exchange market is currently bullish on the euro, but structural diversification of capital flows will make this theme a focus for many. I predict an upside risk for the euro against the dollar of $1.15 to $1.20 this year, which is rapidly becoming the base case.”
After US President Donald Trump introduced tariff measures and pushed the US-China trade war to a new height, investors reassessed the role of the US dollar in the global financial system. The euro is now the main beneficiary of the weakening of the US dollar. The German finance minister said on Friday that governments should seize the opportunity to increase the weight of the euro in global trade.
Currently, strategists are assessing the next move of the euro. The euro has risen nearly 4% against the US dollar in two days, surging from $1.10 to nearly $1.15. As of 7:45 a.m. London time, the euro was up 0.5% against the US dollar at $1.1413.
Positioning for a stronger euro in the options market has accelerated sharply. The so-called risk-reversal indicator, a barometer of market sentiment that measures the demand for buying and selling euro contracts, soared last week, with one-week contracts showing the highest skew in favor of a euro rise in five years. Volatility also rose sharply, closing at the third-highest level since 2010.
According to the position data of the U.S. Commodity Futures Trading Commission (CFTC), as of April 8, the long positions of leveraged traders and institutional traders in the euro reached the highest level in six months.
Van Luu, the global head of currencies at Russell Investments, said that the euro was once mainly regarded as a risky asset, but recently it has risen due to the influence of both good and bad news.
I do see a structural shift in the medium term that is positive for the euro, in the context of what is and what is not a safe haven.
Technical analysis:
Gold: Yesterday, we provided the yellow zone in the plugin for sweeping liquidity. The subsequent rebound is expected to have approximately 30 dollars (300bp) of space. Today, we continue to monitor the momentum break signal near 3230 and place the liquidity sweep buy order near the 3200 mark. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
The Nasdaq index: The price failed to break above 19,280, so the upward trend could not be sustained further. However, the downside is restricted by the yellow zone indicated in our plugin. Continue to take advantage of the consolidation pattern for buying on dips intraday, and pay attention to the rebound buy signal near the yellow zone at 18,700. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Crude oil: As Trump has postponed the full reciprocal tariffs for 90 days, the pressure on oil prices from recession concerns has been greatly alleviated. Yesterday, we reminded in the plugin that when the price retraces to around 60.50, it’s a good opportunity to buy low. As a result, the price dropped to a minimum of 60.58 before rebounding by more than 1 dollar (100bp). Today, continue to pay attention to the buying opportunities brought by new momentum breakthrough signals. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V:Hana-fgfg.
Today’s key financial data and events to focus on:
14:00 UK ILO unemployment rate for the three months to February
17:00 Eurozone April ZEW Economic Sentiment Index
20:30 Canadian March Consumer Price Index (Year-on-Year)
20:30 US April New York Fed Manufacturing Index
Richmond Fed President Barkin is scheduled to speak at 23:35.
