The opinions expressed in this report are those of Macro Hive and are considered market commentary. They are not intended to act as investment recommendations. Full disclaimers are available at the end of this report.

  • Leveraged funds have materially trimmed their bearish EUR positioning, while asset managers have increased their bullish EUR exposure by about 15%. This is the biggest position among leveraged funds and asset managers.
  • Throughout 2024, EUR/USD has traded in a ~1.06/~1.11 range, with the price peaking at the beginning of the year and troughing in mid-April. The past year’s trading range has been ~1.0450/~1.1250. CME Group data on option strikes is balanced between upside and downside demand in EUR/USD.
  • The FX volatility curve using CME Group options data suggests investors are relatively calm.

The year began with EUR/USD trading above 1.10, driven by dovish market expectations for U.S. interest rates. The pair dipped to ~1.07 in mid-February, bounced into a ~1.0750/~1.0950 range for the next two months, and has traded between ~1.06 and ~1.09 since mid-April.

Leveraged funds have materially trimmed short EUR exposure, cutting net shorts from -52.3K contracts to -6.1K contracts (Chart 1). Beyond EUR, leveraged funds trimmed short JPY positioning, flipped from small short to small long GBP, and have increased bearish CAD exposure.

Meanwhile, asset managers have become more bullish EUR, increasing long EUR exposures to +283.2k contracts from +244k in early May (Chart 2). They are bearish all other currencies, although this positioning is more modest than in EUR.

Macro Hive Take: Rangebound price action in EUR/USD has made trading the pair difficult. Our bias remains to sell EUR/USD, although we wait for better levels. Both real money and hedge funds have been buying euros in recent weeks, partly based on a narrative shift away from U.S. growth exceptionalism to growing belief in a European rebound. However, we do not expect this theme to dominate ahead. We think U.S. economic prospects remain superior to that of the Eurozone and, as such, prefer USD to EUR.

Option strikes

Investors see EUR/USD upside and downside as balanced. According to CME Group data on option strikes:

  • Moderate net demand exists for EUR/USD calls solidly between 1.09 and 1.14 (Chart 3).
  • In contrast, there is also material net demand for EUR/USD puts between 1.08 and 1.03.

What to watch: The next Fed rate decision ( June 12) will be key; it falls on the same day as U.S. CPI. Markets expect the Summary of Economic Projections to show at most two cuts through 2024, yet we expect just one. Thereafter, EZ CPI details (June 18) and U.S. Core PCE (June 28) will determine the direction of EUR/USD, while the first Presidential Debate (June 27) will catch the eyes of traders globally.

FX investor risk appetite

CME Group has a range of FX volatility data to help investors track the level of volatility. We can also use FX volatility data to determine investor risk appetite. We find the shape of the FX volatility curve useful in this regard. When shorter-dated FX implied volatility is higher than longer-dated volatility, this suggests investors are worried or in panic mode. In contrast, when shorter-dated FX volatility is lower than longer-dated volatility, this suggests investors expect calm markets. The latest data finds:

  • The FX volatility curve remains at steeper levels than throughout 2023, suggesting investors remain calm. This is likely because economic growth has stabilized and conviction remains that easier central bank policy is coming this year (Chart 4).

  • The move aligns with CME Group’s CVOL volatility indices, which have followed a similar dynamic to trade near year lows.

 Outside FX, equity volatility remains historically low, while rates volatility remains high.

The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by Macro Hive. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.


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