Investment case:
• The beginning of 2010 will be characterized by USD funding as investors are embarking on a new accounting year with fresh books.
• The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should
• We expect, however, that the uncertainty relating to the other countries finances will abate over the coming month. If things calm down in this respect, the euro will be strengthened.
• We believe that the strong technical level at about 1.3980-1.4000, at which both the 55-month and the 12-month moving averages come in, will hold up initially.
• The strategy horizon is 1 month.
Potential/strategy:
We recommend that investors buy EUR/USD forward on Monday with a kick into forward (bought put. strike 1.4150 plus sold call, strike 1.4150, kick-in at 1.4800) – expiry in 1 month. The price is about USD 11,000 per EUR 1 million (indicative). Spot reference: 1.4139
If the problems relating to other countries like Greece develop further, any loss will be limed to the option premium. If EUR/USD reaches 1.4800 within one month, the loss will also be limited to the option premium. Target at 1.4600.
For forex spot trading we recommend BUY EURO/USD opening trading by monday, target price 1.4400-1.4600, time horizon 1 month. Spot reference: 1.4139
Risks:
• Renewed focus on internal imbalances in the euro zone and the downgrade of Greece’s credit rating put pressure on the euro
• The technical level does not hold up and we seriously begin to see a trend reversal for the dollar.
• The Fed surprisingly announces a positive economic outlook at the coming FOMC meeting.
• The beginning of 2010 will be characterized by USD funding as investors are embarking on a new accounting year with fresh books.
• The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should
• We expect, however, that the uncertainty relating to the other countries finances will abate over the coming month. If things calm down in this respect, the euro will be strengthened.
• We believe that the strong technical level at about 1.3980-1.4000, at which both the 55-month and the 12-month moving averages come in, will hold up initially.
• The strategy horizon is 1 month.
Potential/strategy:
We recommend that investors buy EUR/USD forward on Monday with a kick into forward (bought put. strike 1.4150 plus sold call, strike 1.4150, kick-in at 1.4800) – expiry in 1 month. The price is about USD 11,000 per EUR 1 million (indicative). Spot reference: 1.4139
If the problems relating to other countries like Greece develop further, any loss will be limed to the option premium. If EUR/USD reaches 1.4800 within one month, the loss will also be limited to the option premium. Target at 1.4600.
For forex spot trading we recommend BUY EURO/USD opening trading by monday, target price 1.4400-1.4600, time horizon 1 month. Spot reference: 1.4139
Risks:
• Renewed focus on internal imbalances in the euro zone and the downgrade of Greece’s credit rating put pressure on the euro
• The technical level does not hold up and we seriously begin to see a trend reversal for the dollar.
• The Fed surprisingly announces a positive economic outlook at the coming FOMC meeting.
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