Photo: Flickr/Andrea Guerra
The latest Commitment of Traders data from the CFTC reveals that bets against the euro (i.e. short positions) are up 12 per cent since last week, standing at the highest short levels since at least 2007, according to Dow Jones.There is, however, one major player in the euro crosses that could provide the selling for more downside. Kit Juckes, global head of foreign exchange strategy at Société Générale, penned in his daily note to clients yesterday (emphasis added):
I was asked yesterday who I think is the marginal seller of the euro at these levels, given that the ‘speculative’ market is already short, the Euro Zone’s woes are well known, and the underlying balance of payments trends are healthy. The answer is still the Swiss National bank, as far as I can see. The SNB is putting up a furious defence of the EUR/CHF ‘floor’ at 1.20, but in the process, they are accumulating a lot of Euros. At the end of Q1, the SNB held just over half of its reserves in Euros, and just over a quarter in Euros. There is plenty of speculation about how much intervention has been undertaken in recent days, but it is safe to say it is substantial (tens of billions of Euros). If the SNB wants to keep to its current currency weightings, they will need to sell Euros and buy dollars, at the same time as they buy EUR/CHF. That seems counter-productive, providing a big seller of EUR/USD into a market where political uncertainty has shrunk the pool of buyers. The euro has enough on its plate without this, and if EUR/USD is merely a psychological support level, it isn’t going to hold.