Bailing out of DAX & Dehedging EURUSD

by Ashraf Laidi

Apr 30, 2015 15:25

Wednesday's 378-point collapse in Germany's DAX-30 index—a 3.2% drop, was the biggest in a single day since the eruption of the Spanish/Italian debt crisis in June 2012. The selloff was intensified by asset managers existing from DAX-30, Eurostoxx-50 and other Eurozone equities, which were accumulated since November, coinciding with the ECB's QE becoming certainty. As asset managers closed out of their Eurozone stocks, so did the hedging arrangements against EUR weakness. The result was a violent snapback in EURUSD. As speculators pile on the shorts, the 8% decline in the Dax could well become 12% as technical chase up the 100-DMA. As the shorts rush in, EURUSD bulls could see their own 100-DMA materialize at 1.1300.

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