30 Jan 2015
Trading the DKK peg – BAML
FXStreet (Barcelona) - The Bank of America-Merrill Lynch Team shares the trade setup for EUR/DKK, suggesting going short on the pair.
Key Quotes
“The Danes have so far been successful in holding EUR/DKK within recent multi-year ranges, and have indeed succeeded in pushing the pair up to 2015 highs. At what cost this has been achieved will be revealed in early February when FX intervention data is published.”
“Though we believe that the threshold to abandon the EUR/DKK peg is much higher than it was for the Swiss, one cannot completely discount the possibility of an eventual recalibration of the current trading range.”
“A short EUR/DKK cash position (entry at 7.4440) would therefore be the best expression on positioning for the possibility of band adjustment.”
“The historic preference of the central bank to keep DKK on the strong side of the central rate would define the parameters of our trade and the location of our stop which we would place just above the central rate at 7.4630.”
“Though EUR/DKK implied volatility has picked up in recent weeks, 3mth historical volatility has barely realized more than 1%. We therefore feel the risks of a sudden move in spot to take us out of our position are low.”
Key Quotes
“The Danes have so far been successful in holding EUR/DKK within recent multi-year ranges, and have indeed succeeded in pushing the pair up to 2015 highs. At what cost this has been achieved will be revealed in early February when FX intervention data is published.”
“Though we believe that the threshold to abandon the EUR/DKK peg is much higher than it was for the Swiss, one cannot completely discount the possibility of an eventual recalibration of the current trading range.”
“A short EUR/DKK cash position (entry at 7.4440) would therefore be the best expression on positioning for the possibility of band adjustment.”
“The historic preference of the central bank to keep DKK on the strong side of the central rate would define the parameters of our trade and the location of our stop which we would place just above the central rate at 7.4630.”
“Though EUR/DKK implied volatility has picked up in recent weeks, 3mth historical volatility has barely realized more than 1%. We therefore feel the risks of a sudden move in spot to take us out of our position are low.”