EUR: Asymmetric risk for Thursday – SocGen

The accumulation of EUR long speculative positions has been virtually unopposed since the French election to the point that risks surrounding this week’s ECB meeting have become increasingly lopsided to the downside, according to analysts at Societe Generale.

Key Quotes

“With the exception of 2007, retracements and mean reverting declines from crowded positions, sometimes temporary, have been the norm irrespective of whether the longer trend was down (May 2011) or up (November 2013).”

“EUR/USD dropped 3.6% in two days in May 2011 after then ECB President Trichet pledged to keep non-standard measures in place and held off from raising interest rates for a second time in three months. The second instance was in November 2013 when the ECB cut the refi rate to 0.50% and EUR/USD dropped 3% in a week. Is history about to repeat itself?”