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CIBC Recommend Short EUR/USD Position

EURUSD

CIBC issue new EUR/USD trade recommendation: Short EUR/USD to target 1.15, stop/loss at 1.2010

  • They write that the trade is a play on the looming divergence between the Fed and the ECB.
  • "We expect the Fed to signal a taper at the September FOMC, and that the market will pick that up beforehand as incoming data (especially nonfarms) comes in stronger. That scenario should see long-end US real yields underperform – which will reinforce the new floor that we have now for the USD."
  • "While we expect the ECB to reduce PEPP buying in September, we don't expect any passthrough to the EUR from this. The USD should also benefit from any risk of a debt ceiling standoff given its sensitivity to broader liquidity conditions."
  • "For the trade itself, the stop-loss level is ideal given its psychological importance. The target is close to the 50% retracement level of the EUR/USD range since March 2020."
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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