Credit Agricole anticipates broad-based mild selling of the USD at month-end, according to their FX rebalancing model. The strongest sell signal is expected against the EUR. <\/p>\n
Their corporate FX flow model suggests buying EUR and selling GBP during this period. Based on these insights, Credit Agricole plans to buy EUR against a basket of USD and GBP until 1600 GMT on 31 July, unless market conditions force an early exit. No specific entry or stop levels are provided.<\/p>\n
We’re positioning for a weaker US dollar into the end of July, based on the firm’s rebalancing model. This suggests looking at derivative trades that benefit from a falling greenback, such as buying EUR\/USD call options. The signal is for mild selling, so we shouldn’t expect a dramatic move.<\/p>\n
This view is strengthened by the strong performance of U.S. equities this month. With the S&P 500 gaining over 3.5% in July, global fund managers will likely sell dollars to rebalance their portfolios. We see this as a predictable flow that often pressures the dollar in the final days of the trading month.<\/p>\n
The corporate flow model also signals a divergence, favoring the euro while expecting sales of the British pound. This suggests that options on the EUR\/GBP cross rate could be an interesting play, potentially buying calls to target upside. It aligns with the strategy of buying the single currency against a weighted basket.<\/p>\n
Historically, these month-end flows are not guaranteed and can be overshadowed by major data releases. We must remember that this week also holds a key inflation report and a statement from the central bank. Therefore, any positions should be managed with tight stops, especially since Low notes that no specific entry levels were provided.<\/p>\n
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