When to Buy Euro-Dollar, By a Citi Trader

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A trader at one of the world's biggest foreign exchange dealers is holding out from buying the Euro-Dollar exchange rate, saying he is holding out for a better entry level.

Citi's Angus Yard says the easy part of the trade in EURUSD upside is complete, with the market moving from 1.0575 to above 1.0850.

Citi's measure of market positioning shows a cut in the 'long' position held on the Dollar from +4 to 0.5. (This is on a positioning scale from -5 to +5 scale).

"The hard part of the move now starts with key resistance between 1.0970 and 1.1020 where I think adding to core longs towards 1.0850 now makes sense (said this at the start of the week before we pulled back to 1.08525 yesterday)," says Yard.

There has been some speculation as to what the victory of Geert Wilders in the Netherlands vote means for the Euro, but the Citi trader says it does very little to the Euro story, just as his loss did very little in March 2017.

Looking ahead, the time to enter fresh buys on Euro-Dollar will come when European data comes off a very low base whilst U.S. data comes off a very high level.

"It won't take much for this market, at this time of year, to flip to outright short USDs as calls for the Fed to cut come across louder and louder. I am not seeing this yet but clients are very close to pulling the trigger and flipping outright short USDs, it will only take a slight beat in European or miss in US data to trigger a USD selling wave," says Yard.

He adds that he remains of the view that the USD trades weak into year-end but has cut back EURUSD longs, looking for more two-way price action and better levels to increase exposure.

"Should we break through 1.1020 then I will be a quick USD seller as through here little resistance stands in the way of 1.11 and 1.1150, my updated year-end target," says Yard.