SPY - Go Long The Euro Against The Sterling And The Swiss Franc

Introduction

In the past few months, the US dollar weakness generated a significant trend in most of the major currencies as the massive liquidity injections from the Fed resulted in a 10 percent retracement on the USD index since its high of 103 reached on March 20^th. Hence, the euro, which was starting to be significantly undervalued according to a range of ‘fair’ value metrics (OECD PPP prices in a fair exchange rate at 1.42), retraced sharply higher and slightly crossed the psychological 1.20 resistance in the beginning of the month.

Even though

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