In its latest client note, the analysts from Citi offered their outlook on the Euro, as they describe it as a “Global Macro Strategy Ad Hoc Comment”.
“EUR Positioning: What’s Going On?
CFTC positioning data shows that the net speculative position in the EUR/USD contract is currently long 112k contracts. Despite the USD rally over the past few weeks, this is only a reduction of ~35k contracts from the all-time net speculative long position of +147k contracts.
The first significant wave of EUR/USD buying was in May 2017. Back then there was a build to ~80k contract net long within 6 weeks. Meanwhile, spot moved from 1.09 – 1.12.
The second major wave came around the time of US fiscal stimulus, which saw aggressive USD and UST selling, mostly in January. EUR/USD net positioning moved from 81k contracts net long to 147k contracts net long within 6 weeks. The equivalent spot move was from 1.1740 – 1.24.
Therefore, absent a confirmed and sustained break of 1.18, it’s unlikely that we see the unwind of “wave two” or even begin to spook “wave 1”.”