EUR/USD: BNP Paribas says selling is increasingly attractive

BNP Paribas notes that their positioning analysis suggests that the squeeze on the EUR this week eliminated many short positions.

"Our EUR position indicator is at its lowest short level of the year, while the EUR/USD is flatter since just before the fall of the euro in July 2014. However, positioning is not yet flat, and there is still room for more short positions closures if the profitability rates continue to rise.

We continue to believe that underlying flows will again slow down the EUR/USD, and eurozone investors will be able to take advantage of high EUR levels to add external positions.

The result of last week's squeeze will probably shift short-term positions into the "safer" hands of long-term investors, ensuring that trades are less vulnerable to future squeezes. This process has already happened on the USD/JPY, and pull-backs on this pair were minimal this year.

We continue to believe that the risk/return ratio for new short EUR/USD positions is becoming increasingly attractive."