For the sixth day-in-a-row, a rather interesting price action has occurred in
the most liquid FX pair in the world. Each day we see EURUSD crumble
rapidly into the US day-session open, only to recover rapidly as the European
market closes. These are not 10pip swings. These are 40-100pip
gaps! What is going on? Its unclear for sure but we suspect some large
entity is helping the market out with its dire need for European banks to
repatriate their EUR to cover collateral and liquidity needs (remember we are
seeing ECB margin calls rising and at these levels LCH will for sure be raising
collateral on the very bonds that the most risky banks own). In other words,
someone stomps on the USD bid (lowers the price of EURUSD) - which everyone
loves as it correlates so highly with lower implied vol and higher stock prices
- which gives the European banks a better (lower) rate of exchange to get out of
their USD into the much needed EUR - and hence the flood comes in and we revert
back to pre-day-session levels. Another conspiracy?
Charts: Bloomberg
Charts: Bloomberg
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