Tag Archives: Forex

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Morning Brief – US Dollar

US Dollar


With US consumer sentiment falling in the last two weeks and indications of slower job growth, hopes for a fast snap back for the US economy have been dented but not badly damaged-see below. What this adds up to is a drop of 1.5% in the USD over the past fortnight. All grist to the GBP mill which at over 1.39 is benefitting from a Boris vaccination bounce as well as the USD weakness. Expectations of a stronger global recovery is of course also bad for the USD.

EUR has recovered some of its poise and is trading at USD 1.2150+ while the row between EU and its constituent parts rumbles on over the European vaccination rollout.


Silver and Gold


Silver off at $27.90 and Gold down $22.50 a whisker above the psychologically key level of $1800-why? It’s all down to where the bond market is trading with 10 year US Treasury yields at 1.25% a high for this year buoyed by hopes that the $1.9 trillion Covid relief package is progressing towards finalisation plus what is perceived as an increasingly successful US vaccination program.


Hang Seng


Hong Kong’s Hang Seng index re-opened post New Year with a bang yesterday jumping almost 2% to 30,746.66. While China remains shut, stocks rallied and interestingly those rises notably included cinema stocks IMAX China  and Alibaba Pictures. Beleaguered cinema stocks in the West might draw comfort from the fact that Chinese box office takings during the week ending 11-02-21 set a revenue record.


Good Vibrations


With the end of February (almost) in sight, surfers are dusting off their boards and getting ready for the season everywhere from Biarritz to Big Sur by listening to their surfing sounds.  Therefore it is appropriate to turn to Brian Wilson and The Beach Boys who this day in 1966 recorded Good Vibrations. After that Brian Wilson having experimented with marijuana worked his way through the entire menu of so called psychedelics before moving on to cocaine. Happily now at the end of that particular journey, Brian Wilson continues at the age of 78 to perform and produce great music. Here is Good Vibrations:


I-I love the colorful clothes she wears
And the way the sunlight plays upon her hair
I hear the sound of a gentle word
On the wind that lifts her perfume through the air


I’m pickin’ up good vibrations
She’s giving me the excitations (oom bop bop)
I’m pickin’ up good vibrations (good vibrations, oom bop bop)
She’s giving me the excitations (excitations, oom bop bop)
I’m pickin’ up good vibrations (oom bop bop)
She’s giving me the excitations (excitations, oom bop bop)
I’m pickin’ up good vibrations (oom bop bop)
She’s giving me the excitations (excitations)


Close my eyes, she’s somehow closer now
Softly smile, I know she must be kind
When I look in her eyes
She goes with me to a blossom world


I’m pickin’ up good vibrations
She’s giving me excitations (oom…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – False signal

False signal


As a barometer of the world economy the price of oil is watched closely. Due to the relatively inelastic demand and supply of oil, at least in the short run, higher oil prices tend to be a signal of a more active global economy. Therefore movement of energy market tickers higher can serve as the metronome of the global economy.  What we see in today’s market is a confusing signal of a rising oil price but one that could be down to idiosyncratic market conditions rather than a shift of gear for worldwide markets. Certainly, the recent performance of commodity currencies attests to the rising price of oil as a false signal.


Artic conditions have descended through northern America with areas as far South as Texas and the Gulf of Mexico experiencing sub-zero conditions. The freeze has not only driven up the demand for energy but also taken sources of energy including refineries and renewables off grid. Energy prices across the United States, particularly in those areas not familiar with such unseasonable weather, have sky rocketed. This sharp price rise has fed through to the global energy market with the price of Brent crude, oil located in the North Sea, still holding onto price gains this morning. This rise in oil and energy prices has had notable effects on currencies whose economies are exposed to the energy market, namely NOK and to some extent GBP. However, given that the price move is not indicative of a healthier global demand and cross-commodity price increase, traditional commodity, high-beta, currencies are not feeling the warmth they usually might amidst rising energy prices.


Identifying any signal from the noise in energy prices created by the rare conditions in the US oil market is challenging. The price move is particularly important as it sits within the broader, more important and systemic reflation trade that has been captivating markets. As the world prepares for what UK PM Boris Johnson has framed to be the last lockdown and return to normality, many market participants are expecting the price of oil and commodities at large to rally. This expectation is fed by the anticipated broader restoration of demand towards pre-pandemic levels and one that Wall Street names including JPMorgan and Goldman Sachs could send the price of oil per barrel close to $100. It is this kind of broader reflation that will benefit the wider commodity market and therefore impact the valuations of currencies in the wider commodity space including CAD, AUD and NZD. As temperatures are expected to give way to more mild conditions next week, we shall see whether today’s idiosyncratic market event is the catalyst to accelerate the pace of the reflation trade.




Discussion and Analysis by Charles Porter

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Morning Brief – St Valentine

St Valentine


Named after two martyrs both named Valentine executed by Roman Emperor Claudius ll in the 3rd century AD on 14 February(14-02-0002), Valentines Day now enjoys worldwide commercial success. It started off as a pagan festival which was then adopted by the Catholic Church before taking off with cards, flowers and gifts being exchanged. Needless to say, SGM-FX Operations Head and romancer Romeo, Jamie Pritchard marked Valentine’s Day florally, but in addition he substantially raised the bar by inking the purchase of a new home over the weekend.


Gorka Szczesliwicka


This will mean something to Polish readers and especially Polish skiers as being the nearest skiable mountain near Warsaw which has just re-opened. In a sign that gives hope to the rest of Europe, Poland has taken the positive and pragmatic decision given the relatively low incidence of Covid to get the entertainment sector going by declaring the cinemas and ski slopes open which will in turn give the economy a much needed boost. The Zloty duly rallied on this news and strengthened to 3.71 v USD.




Yesterday 14-02-21 you may have been too busy celebrating Valentine’s Day to have noticed, but a new radio station was launched named Boom. Targeted at baby boomers ie those born between 1946 and 1974, Boom has a great selection of presenters, music and other excellent content. Broadcasting digitally from London, Birmingham, Glasgow and Bristol, Boom can be found at 97.3 FM. Check it out, it’s just the antidote for 2021!


Livin’ on a Prayer


New Jersey rock band Bon Jovi released this hit song in 1987. Three members of the band that was launched in 1983 are still part of the current line up and continue to pack out the very largest stadiums. Here is Livin on a Prayer that still resonates today 34 years on:


Once upon a time not so long ago


Tommy used to work on the docks, union’s been on strike
He’s down on his luck, it’s tough, so tough
Gina works the diner all day working for her man
She brings home her pay, for love, for love


She says, we’ve got to hold on to what we’ve got
It doesn’t make a difference if we make it or not
We’ve got each other and that’s a lot for love
We’ll give it a shot


Woah, we’re half way there
Woah, livin’ on a prayer
Take my hand, we’ll make it I swear
Woah, livin’ on a prayer


Tommy’s got his six-string in hock
Now he’s holding in what he used to make it talk
So tough, it’s tough
Gina dreams of running away
When she cries in the night, Tommy whispers
Baby, it’s okay, someday


We’ve got to hold on to what we’ve got
It doesn’t make a…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Ocado



British online grocery, Ocado not only announced soaring annual earnings of 69% yesterday but felt sufficiently confident to announce that the future of food retailing had changed-for ever. No longer will shoppers choose to visit supermarkets, but will instead click and await delivery. Ocado’s hook up with Marks and Spencer is going very well and Ocado’s value is now 4 times that of Sainsbury’s. UK shoppers have taken to online food shopping with enthusiasm and Ocado is seeking to repeat that success in both the USA and Japan where they already have partnership deals.


United Arab Emirates: Life on Mars


This time the UAE is in the news for having spent $200 million to join the Big Boys Club with their own unmanned space mission to Mars. Not content with the 50c temperatures at home some months of the year, the Emiratis have designs on the Red Planet. The UAE spacecraft entered its Martian orbit at 4pm London time yesterday ahead of craft from both the USA and China that also plan to land on Mars shortly. The UAE mission set off in July last year and is named Amal meaning hope. The UAE Dirham continues to take all this in its stride and is unchanged at 3.67 versus USD.


US Bank Stocks


Having looked at US Treasury Bond Yields earlier this week: 2 years 0.12%, 5 years 0.50% and 10 years 1.15%, I looked into dividend yields on top name US bank shares:

Citigroup, 3.3%, JPMorgan 2.6% and Bank of America 2.2%. Of those, the share that is most undervalued or commands the highest discount is Citigroup which is forecast to appreciate by 25% in the next 12 months. As readers know, we neither offer an equity service nor do we forecast equities, but it did strike me that for savers who are not enjoying negative or negligible Euro or GBP interest rates on their hard won savings, the chance of both a decent yield and also capital appreciation by switching into USD is worth considering. Also if that’s not enough to love, Citigroup has a new female British CEO!


The Power of Love


It was Jennifer Rush who wrote and originally sang this hit in 1984 making it a UK number one. However it was 10 years later on this day in 1994 when Celine Dion released her version of the song that went straight to number one in both her native Canada and the USA: here it is:


The whispers in the morning
Of lovers sleeping tight
Are rolling by like thunder now
As I look in your eyes


I hold on to your whole body
And feel each move you make
Your voice is warm and tender
A love that I could not forsake


‘Cause I’m your lady
And you are my man
Whenever you reach for me
I’ll do all that I can


Lost is how I’m feeling lying in your arms
When the world outside’s too much to take
That all ends when I’m with you


Even though there may be times
It seems I’m far away
Never wonder where I am
‘Cause I am always by your side


‘Cause I’m your lady
And you are my man
Whenever you reach for me
I’ll do all that I can


We’re heading for something
Somewhere I’ve never been
Sometimes I am frightened
But I’m ready to learn
Of the power of love




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – 501. V2

501. V2


Having begun its program only a week ago, the plug has been pulled on South Africa’s immediate immunisation through vaccination plan. The first doses of the Oxford-AstraZeneca coronavirus vaccine entered South Africa last week, greeted at the airport by the President and ministerial officials who hailed the delivery as a milestone in South Africa’s fight back against the virus. The vaccination program was immediately over thrown and suspended following a research publication from Witwatersrand university showing little to no protection against mild and moderate forms of the 501. V2 variant. This catchily named strain of the novel coronavirus is what is frequently referred to across the globe as the South African variant. It accounts for some 80% of all new cases in South Africa. The disappointing test results that revealed the Oxford-AstraZeneca vaccine was all but useless against mild and moderate forms of infection rendered the program dead in the water.


Over the last few months as vaccines have gained rapid regulatory approval across the globe, the strength of a nation’s inoculation program has been a significant determinant of its currency. It is unsurprising therefore that the publication of this downbeat medical research and the setback to South Africa’s vaccination program led the Rand to weaken. What is perhaps more surprising is that the sell-off was limited as the USDZAR pair encountered strong resistance at 15 Rand to the Dollar and even ended up closing yesterday’s trade with the Rand up on the day. A bout of USD selling pressure in the New York session last night showed therefore that the vaccination setback will not yet be the most significant driver of the South African currency.


There are other vaccines, notably including the single dose Johnson & Johnson vaccine that have demonstrated they are capable of producing immune responses against the South African coronavirus variant. The Witwatersrand study notably also did not observe immune responses against severe cases of the coronavirus. There are still options left therefore meaning that South African’s vaccination program is down, but not yet out. It is this hope that has limited selling pressure on global currency markets so far.


With warnings regarding South Africa’s public finances and fiscal outlook still echoing in the ears of the markets following admonitions from President Cyril Ramaphosa last week, this setback to the vaccination program could have further implications for the Rand. For now, incidences of new infection following a spike over the New Year remain under control, limiting the forecasted economic impact of the virus and thus the significance of the setback to the vaccination program. South Africa’s Rand will likely be increasingly vulnerable to rising infection rates so long as markets are wary of the setback to the vaccination program and shrinking fiscal headroom.




Discussion and Analysis by Charles Porter

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Morning Brief – The Euro

The Euro


Following Mario Draghi’s selection as Italy’s next Prime Minister, markets were upbeat on Italy’s prospects with the all important spread of 10 year Italian Bonds to German Bunds being at 100 basis points for the first time for a year having blown out to 240 basis points last April when Italy was reeling from Covid. This positivity has not however flowed through to the Euro, which having surged to USD 1.23+ just a few weeks ago and caused market sages to announce the demise of the USD, has fallen below 1.20. Where now? Those same sages are now calling for a re-tracement back to 1.17 and a period of EUR weakness. For GBP buyers of EUR, this has meant the best levels on offer for a year.




Since November, WTI oil has inexorably risen by almost 55% to its current level of $57 as the oil market has taken heart from a unified OPEC, supply cuts and a growing optimism that the global economy will continue to bounce back strongly. Good news given the amount of global debt incurred in fighting the pandemic and the need for a return to productivity. Forecasted to reach $70, oil is the symbol of a broad commodity rally.


US Real Estate Valuations


Bad news for owners of property in Las Vegas which has been crowned as the most overvalued metropolitan area in the USA by 28%. In second place is Dallas Fort Worth.

However as we know, it is always best to remain sanguine with statistics like this proving over time that generally demand considerations play a key part in leading the market; in the case of Las Vegas, it is also one of the fastest growing conurbations in the USA.


The Supremes


It was back in 1965 when the Supremes led by Diana Ross and ably supported by Florence Ballard and Mary Wilson released what was to become a smash hit. For those anoraks among you, the origin of the song was based on the story of a man being discovered by his wife in a motel room and having offered the unconvincing explanation that he was working late, was instructed:

Stop! In the Name of Love:


Oh baby, I’m aware of where you go


Each time you leave my door
Watching you walk down the street
Knowing there’s another guy you’ll meet
This time before you run to him
Leaving me alone again


Think it over
Haven’t I been good to you, babe
Think it over


Stop in the name of love
Before you break my heart
Stop in the name of love
Before you tear it apart


I’m trying hard
Hard to be patient
Wish you’d stop this infatuation
But each time I think of you together
I see myself losing you forever
This time before you leave my heart
And rush back into his arms


Think it over
Haven’t I been good to you, babe
Think it over
Haven’t I been sweet to you, baby


Stop in the name of love…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – US Employment

US Employment


Cheering news for the global economy from the US with initial jobless claims falling to a weekly 779,000 which suggests that US unemployment is beginning to reduce . Mid January there were 17.8 million Americans claiming unemployment benefits. Equities rallied on the news yesterday and the USD strengthened against most currencies; US treasury prices fell with 10 year US Treasury bonds now yielding 1.14%.


Bank of England


With the BoE reported to be considering negative rates, the market initially took fright in yesterday’s trading session and GBP sold off sharply. When the Bank of England subsequently made clear that negative interest rates were not going to be deployed, GBP rebounded strongly before giving up some ground later in the evening. A cumulative move (+ and -) of more than 2% on the day.


Aussie Rules


Last year the UK ordered an increase of 43 million litres of Australian wine as Brits locked down and thirsty chose Australian wines increasingly over other countries’.

The UK is historically the second largest importer of Australian wine globally behind China but given the ongoing trade spat between China and Australia plus the developing domestic Chinese wine industry, that could change. Although that really would be a turn around as in 2020 China imported GBP 500 million of wine which is almost exactly double that of the UK.




It was this day in 1983 that  rock band, Toto had their one and only Number 1 Top 40 Hit. However the group has sold more than 40 million records globally and released 14 albums, so they are hardly one hit wonders. Here is the song that they are best known for: Africa:


I hear the drums echoing tonight
But she hears only whispers of some quiet conversation
She’s coming in, 12:30 flight
The moonlit wings reflect the stars that guide me towards salvation
I stopped an old man along the way
Hoping to find some old forgotten words or ancient melodies
He turned to me as if to say, “Hurry boy, it’s waiting there for you”


It’s gonna take a lot to drag me away from you
There’s nothing that a hundred men or more could ever do
I bless the rains down in Africa
Gonna take some time to do the things we never had (ooh, ooh)


The wild dogs cry out in the night
As they grow restless, longing for some solitary company
I know that I must do what’s right
As sure as Kilimanjaro rises like Olympus above the Serengeti
I seek to cure what’s deep…


Have a Great Weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – From President to Prime Minister

From President to Prime Minister


After passing on the ECB’s Presidency following eight full years in office, Mario Draghi was set to retire. However, yesterday Super Mario accepted the mandate offered by Italy’s Prime Minister Sergio Mattarella to form a new technocratic government. This follows the resignation of Giuseppe Conte in response to the increasingly unstable coalition government he had led for some 16 months. Attempts to reconstruct a coalition had not gone as expected and consultations with party leaders were unable to yield progress towards the reformation of a government. The President concluded that in the middle of a health and economic crisis brought forth by the escalating Coronavirus pandemic, the delay, uncertainty and logistical nightmare of a general election was unfeasible. Time to call in Super Mario…


We’ve now gone full circle in the Eurozone: a politician became a central banker in the form of Christine Lagarde and now a central banker could become a politician if Dr Draghi fulfils his mandate. Reverse engineering might tell us that the transitions between politician and central banker is far from smooth. Lagarde’s early days in office were fraught with mistakes notably including her observation that Italian borrowing costs over the Eurozone norm were not her problem. Due to the technocratic nature of central bank governance and the political nature of forming a government many commentators would have thought that never the twain shall meet. Those sceptics could be proved wrong for a second time as the former central banker embarks upon his quest to form a government. If he is successful, a technocratic government could have big implications for the Euro.


The news of Mario Draghi’s acceptance to form a technocratic government to steer Italy through the vaccination phase of the pandemic and economic recovery was welcomed yesterday by markets. Italian bond yields fell closer in line with Eurozone peers leading to reduced borrowing costs for the Italian government, reflecting greater certainty and less risk surrounding the Italian polity. The FTSE MIB, Italy’s stock market benchmark, rose 2% in morning trade in Milan and the Euro saw a brief spike. Support behind the Euro from yesterday’s announcement was short lived with the single European currency still ending up down on the day versus the Dollar. Unsurprisingly, shares in Italian banks were the biggest winners, up around 5%.


Draghi has one ace up his sleeve, that it is a technocratic not democratic or people’s government that he is mandated with forming. However, he will not be able to save Italy from a health and economic crisis such as this with his one liners. Promising to do whatever it takes to save Italy from the grips of the pandemic or the economic downturn will do nothing to discourage the virus or incite economic confidence. Indeed, the tool kit too at his disposal will be very different. Towards the end of his time at the ECB he, like his successor, called for governments to spend more to fuel price increases and complement monetary policy. If successful in his immediate task of forming a government, this could put more pressure on Italy’s ballooning debt. For now, if a government is successfully in place it will limit political risk in Italy, curb BTP spreads and likely support the Euro. This morning, however, with EURUSD threatening to lose the 1.20 handle, it might not come fast enough.




Discussion and Analysis by Charles Porter

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Morning Brief – Oil



With OPEC agreeing to keep supply just below demand, Saudi Arabia voluntarily cutting their production by 1 million barrels per day, inventories therefore falling and cautious optimism on economic growth, WTI oil duly rose to $54.88 in yesterday’s session. Forecasts vary but at present point towards a rise from current levels by as much as 13% to $62 by year end. Heating oil also seeing sharp rises as the north east of the USA battens down for a severe blizzard.


European Economy


The 19 EU countries that make up the EURO countries reported a contraction in Q4 2020 of 0.7% after a fall of 11.7% in Q2 and a rise of 12.4% in Q3 2020. While not as sharp a drop in Q4 as some forecasters had predicted, nevertheless it was not helpful to the European leaders as the perception grows that the vaccine roll out has not been handled well. This combined with an increase of dissatisfaction with the management and implementation of the latest LockDown and a rise in populism has seen EUR fall to $1.20 and questions starting to surface about whether the key 1.1950 chart point will be breached.




Not a market that we normally track, but here is a great example of trade disruption leading to far away consequences. The Californian lobster market is large and growing and is centred in beautiful Santa Barbara which while it produces different sweeter lobsters than those in New England, nevertheless means that the meat is highly prized. Due to the ongoing trade spat between Australia and China, California is now exporting increasingly large amounts of lobsters to China where it commands brisk pricing and snob appeal. Lobster meat has ranged in price between $8 and $40 in the past 12 months. Currently $33 a pound, the Californian lobster industry is not in a hurry to see an early resolution to the China-Australia dispute.


Crocodile Rock


It was this day in 1973 that Elton John had his first chart topper with his and Bernie Taupin’s number, Crocodile Rock reaching Number 1. Elton repeated that first success consistently over the next 3 decades but here is that first hit:


I remember when rock was young
Me and Susie had so much fun
Holding hands and skimming stones
Had an old gold Chevy, and a place of my own


But the biggest kick I ever got
Was doing a thing called the Crocodile Rock
While the other kids were rocking ’round the clock
We were hopping and bopping to the Crocodile Rock, well


Crocodile rocking is something shocking
When your feet just can’t keep still
I never knew me a better time and I guess I never will
Oh, lawdy mama those Friday nights
When Susie wore her dresses tight
And the Crocodile rocking was out of sight


Laa, la-la-la-la-laa


But the years went by and the rock just died
Suzie went and left me for some foreign guy
Long nights crying by the record machine
Dreaming of my Chevy…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Hokey Cokey

Hokey Cokey


The public handling so far of challenges to the EU’s vaccination program have been little short of disastrous. Tensions and criticisms have built within and outside of the European Union with accusations of protectionism and foul play levied towards the European Commission in particular. The challenge to the bloc flies directly in the face of the market’s core expectation for this year: a stronger Euro. Increasing political risk across the Eurozone and a stunted vaccination program creates great risks for the Euro. With markets still holding onto record high open speculative positions on the Euro, it is possible that a further deterioration in the bloc’s foreign policy and challenges to the vaccination program could cause investors to lose faith in their calls, prompting a sharp correction. With the EURUSD pair already having fallen to critical support levels around two-month lows, this week will be critical for the Euro.


What started off as a dispute between Astra Zeneca over access to their vaccination jab created in coordination with Oxford University rapidly turned into much more. The announcement by the company that they might only hit 50% of their expected supply of doses in the first three months’ of the contract appeared to be manoeuvred as a scape goat. This announcement and the company by consequence seemed to be positioned to shift the blame upon for the EU’s failing vaccination program. The reality was however, that the failures of AZ could not possibly be to blame for the stunted rollout of Europe’s vaccination program given that it had, at that time, not yet been approved for use in the bloc.


As last week progressed the dispute between the bloc and the pharmaceutical company spilled out into the bloc’s foreign policy. Discussions beginning in Germany began to gather momentum and prominent Union figures began to discuss preventing exports of vaccine doses from the bloc should supply commitments continue to not be met on EU contracts. These comments were met with calls of undue protectionism and concern of one group of nations hoarding a public good, but the fallout was limited. On Friday evening, however, the European Commission unilaterally moved to invoke article 16 of the Northern Ireland Protocol. This is the doomsday or nuclear option to take immediate action on the border of Northern Ireland when “economic, societal or environmental difficulties” are unmanageable. This declaration it thought would allow it to introduce export controls on vaccines produced in the EU.


What it hadn’t bargained on it appears was the immense backlash from both EU member states, the UK and observers alike all of whom were stunned by the Commission’s unilateral push to invoke the treaty. The Northern Ireland Protocol was a key sticking point in Brexit negotiations and this careless move on a Friday night appeared to fly in the face of both the protocol and the Good Friday Agreement that the protocol is in place to preserve. The EU hastily and almost immediately withdrew its intention to trigger article 16 and that this had been an oversight.


The Commission’s reckless actions given the propensity for political change throughout the bloc notably in countries including the Netherlands, Germany and Italy will exaggerate political risk in the Union. Many nations within the bloc have a propensity towards populism and actions such as these might be thought to fuel the campaign of these parties. This increased risk could force at least the speculative portion of the foreign exchange market that has for a while now held record numbers of open contracts betting on the Euro’s appreciation to reassess their calls on the single currency. EURUSD, the most liquid currency pair, at the last data release still showed 24% of open interest long of the currency pair. A long squeeze might therefore be in store for the Euro if it fails to defend this important support level.




Discussion and Analysis by Charles Porter

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