My pick: Holding short euro basket
Expertise: Fundamental and technical analysis with risk management
Average time frame of trades: A few hours to a few weeks
Contingent on the ECB’s June economic projections, the German central bank is reportedly ready to agree to non-standard easing measures. We could see a move to negative rates, which would be the strongest long-term lever to keep the euro pinned down. Large scale asset purchases could ensue to strengthen the zero interest rate policy environment. To address low liquidity, another round of long-term refinancing operations is possible. But, in the very short-term (a few days), with oversold readings versus several of its major counterparts, and the belief that a small rate cut has been priced in, the euro could be due for a small reversal. Accordingly, this could be an opportunity to sell a euro rally.