Euro Rates Recover, Climbs vs British Pound, US Dollar, Aus Dollar and Others on Extreme Positioning

However, there are some warning that losses may end; "our sense is that the EUR/USD selling may soon tire out," say Bank of Tokyo-Mitsubishi UFJ. Indeed, on Wednesday morning we are seeing the euro holding strong against the dollar while maintaining the impressive gains registered against the pound sterling on Tuesday.

Euro rates today, for your reference:

• The euro to dollar exchange rate (EUR/USD) 0.01 pct higher on a day-on-day comparison @ 1.3135.
• The euro to pound exchange rate (EUR/GBP) 0.01 pct lower @ 0.7974.
• The euro to Aus dollar exchange rate (EUR/AUD) 0.30 pct lower @ 1.4120.

(Ensure your FX provider has a buy order set up so that when your desired exchange rate is reached your order is triggered. This strategy could deliver up to 5% more currency. If you are worried about falls ensure a stop-loss is set - the level below which you are not prepared to go, please learn more here).

Euro Weakness Ahead, But Beware the Corrective Bounce

As mentioned sentiment towards the euro remains negative if we take a longer-term view, but the move lower may be due a break.

Bank of Tokyo-Mitsubishi UFJ say:

"On sentiment alone, the natural tendency today would be to stick with a bearish bias for the week ahead however, our sense is that the EUR/USD selling may soon tire out.

"Sentiment is extremely negative toward the euro and that makes us wary over the short-term. Furthermore, a lot has been made of next week’s ECB meeting after the Jackson Hole speech by President Draghi but the risk next week is that we see no additional monetary easing by the ECB.

"The best we can hope for in our view is perhaps more concrete details on a QE program in the ABS market. Work is already being done on this as was announced in June and that could be the focus at next week’s meeting.

"The risk to our neutral view is further declines to the downside and one key risk is Russia. A further escalation there could hit risk assets and in current circumstances this would be a negative for the euro. Also we will watch EUR/CHF closely.

"At 1.2050, we are getting close to the potential for SNB intervention and increased euro buying by the SNB could be EUR/USD negative if the SNB then decides to switch these euros into dollars to maintain current weightings between the two."

Analysts at Morgan Stanley also confirm there is a chance for a bounce:

"We remain bearish on EURUSD but look to take profit at 1.31. After, we expect a correction higher, where we would look to sell again. We note that our positioning tracker is currently at -6.

"In the past when it has reached around these levels, there has been a EURUSD rebound.

"So with the extreme positioning, we will be watching for any positive data out of the EUR area that could, cause the rebound and provide better levels to sell at. This week the focus will be the ECB and if they sound dovish."