EUR/USD: The threat of capitulation can drag the pair closer to parity – SocGen

EUR longs leave it vulnerable near term, economists at Société Générale report. 

CFTC suggest the market is still short USD

Overall speculative traders’ positioning on the CME, according to CFTC data, is short USD. It isn’t a huge position and of course, this is a snapshot of only one part of the market, but it’s fair to say that positions are not a barrier to stronger US data and higher US Treasury yields dragging the Dollar even higher in the weeks ahead.

EUR/USD positions are clearly still long EUR. Given that the longs are facing adverse rate trends, domestic and international (especially Chinese) growth concerns, the threat of capitulation dragging EUR/USD closer to parity can’t be ignored. 

Throw in the danger that a spike higher in Treasury yields sends USD/JPY above 150, and the arguments against fighting the Dollar rally here seem clear enough.