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FX Convictions – Short EUR/USD - 02 December 2016

the 2015 low of around 1.0458. Similarly, though speculators have increased their long US dollar positions in recent weeks, levels are not extreme yet. As a result further weakness in the euro is likely in 2017. Our target for EUR/USD is 0.95. We have placed a stop loss at 1.09.

Tail risks pricing – more room Level

Downside risk pricing – more room

Reverse scale EUR/USD 1 year 25 delta butterfly

1.5

0.2 0.3

1.4

Level

EUR/USD 1 year 25 delta risk reversal

1.5

0

1.4

-1

0.4 1.3

0.5

1.3

-2

1.2

0.6

1.2

-3

1.1

-4

0.7 1.1

0.8

1.0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

EUR/USD (lhs) Source: Bloomberg

EUR 1y butterfly (rhs)

0.9

1.0 Jan-11 Jan-12

-5

Jan-13 Jan-14 Jan-15 Jan-16

EUR/USD (lhs) Source: Bloomberg

EUR 1y risk reversal (rhs)

161202 fx conviction bearish eur  
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