Week Ahead: USD Bears Unwinding Some Shorts But EUR Set To Remain A Winner - Credit Agricole

Credit Agricole CIB Research notes that this past week has seen USD regained some ground especially against the laggards of the global policy divergence trade – JPY and CHF.

"The USD bears have started to unwind some of their shorts and this could keep the USD supported in the near term," CACIB argues. 

In addition, CACIB thinks that the EUR will likely remain a winner of the global policy divergence trade.

"We expect next week's Eurozone inflation data as well as the series of speeches by ECB officials ultimately to maintain the market positioning for a QE taper announcement in October. We don't think that the EUR has fully priced in the shift in the ECB policy outlook," CACIB adds. 

In line with this view, CACIB sticks with its long exposure in EUR/JPY via options and EUR/CHF* in spot.

Source: Credit Agricole CIB Research