Rhicon Currency Management, a foreign exchange fund manager with operations in Singapore, Geneva and Toronto, is considering purchasing euro calls/dollar puts as it expects the pair to break out of its range in the coming weeks. "This is on our radar screen," said Christopher Brandon, managing director in Singapore. "I anticipate a breakout that will be quite violent," added Brandon, predicting the currency pairing will make a technical break past USD0.8860 to USD0.92 within the next few weeks. Spot was at USD0.8765 last Monday.
Brandon continued that the pairing has been trading within a range since January and has been contracting into a tighter and tighter band, "hence, when the breakout comes it should be quite strong."
Brandon continued that if the pairing moves past the USD0.8860 level and Rhicon expects a further strengthening in the euro, the fund will consider using profit captured in spot to buy at-the-money short-dated euro calls/dollar puts with maturities from one-day to two weeks. Notional size ranges from EUR8-15 million (USD7-13 million).
Brandon added that the fund's focus is on technical analysis: "We're not economists, we're technical traders. We let the charts do the speaking."
Rhicon, which started up at the end of last year (DW, 12/5), has USD1.5 million under management, "plus sizable managed accounts from a major European bank," said Brandon, declining to elaborate. The fund will look to raise USD40-50 million by year-end. Rhicon's broker is UBS Warburg.
