Euro Bullish Momentum Continues, Bank of America Analysts Report
In a recent note dated Aug. 26, Bank of America Securities highlighted the current bullish momentum benefiting the euro in the foreign exchange market. The U.S. dollar selloff in August was a significant focal point, but the broad euro rally may have been overlooked by investors.
The euro's nominal effective exchange rate (NEER) has appreciated by 1.1% on a trade-weighted basis this month, ranking at the 80th percentile over the past 20 years, according to the bank. This strength extends beyond bilateral spot movements, with EUR showing the most near-term bullish momentum among non-USD G10 currencies.
BoA pointed out that EUR/USD calls saw a significant rise in 1-month skew, with a 12% increase, the highest across all USD/G10 pairs. With this momentum in mind, the bank recommends a bullish view on the EUR/SEK cross this week.
EUR/SEK is highlighted as an attractive candidate, with the pair returning -3% over the past month and currently at the 3rd percentile over the past decade. BoA noted that the SEK rally appears stretched, driven by existing short SEK positions unwinding and speculators treating SEK as a "high-beta" proxy for the EUR amid recent risk recovery.
As EUR/SEK spot reaches trendline support and the 200-day SMA, the level becomes attractive for a tactical fade of the month-to-date move, according to the bank. At 06:15 ET (10:15 GMT), EUR/SEK was trading 0.1% lower at 11.3905.
Analysis:
The article discusses how the euro is currently experiencing bullish momentum in the foreign exchange market, with Bank of America highlighting the strength of the currency. The bank recommends a bullish view on the EUR/SEK cross this week, pointing out attractive opportunities for investors. This information can be valuable for individuals looking to make informed decisions about their finances and investments, especially in the forex market.