EUR/USD: Update for the coming trading week
Hi traders,
As analyzed in our previous post, the EUR/USD is facing resistance at the 1.1150 level, where the pair closed with a nicely-looking bearish pinbar pattern. In the previous post, I provided a detailed explanation of why the pair rallied to that level and why a reversal was very likely (we placed a sell limit order earlier that week).
Here's a quick update:
1. Technicals: 1.1150 remains an important resistance and 1.10 an important support. The 61.8% could also provide some selling pressure and push the price lower.
2. Flows: Strong bullish change in EUR positioning, with NC increasing their bullish bets by almost 4k contracts. Dealers increased their hedge against a strengthening EUR by 10k contracts, and open interest rose by 8k.
This was expected, given the positive news around the EC's joint recovery fund. If optimism among eurozone investors persists, this could be a serious headwind for EUR/USD shorts. I am following the situation and adjusting accordingly.
3. Risk sentiment: This is where it becomes interesting. The USD sell-off in the previous week was mostly fueled by improved risk appetite and increasing stock prices as countries started to lift restrictions. The US disappointed with their reaction to the Hong Kong protests, which again fueled risk-on by week-end.
Next week, we await the US (and other) labour market reports where the full impact of the lockdowns could become evident. Businesses are facing bankruptices and the US lost an unprecedented 20 million jobs in April - the worst loss since the Great Depression. Have the markets fully discounted those numbers yet? Let's see.
4. Correlations: Next post.
Please hit the "LIKE" button if you enjoyed this analysis. Thanks a lot! 👍
As analyzed in our previous post, the EUR/USD is facing resistance at the 1.1150 level, where the pair closed with a nicely-looking bearish pinbar pattern. In the previous post, I provided a detailed explanation of why the pair rallied to that level and why a reversal was very likely (we placed a sell limit order earlier that week).
Here's a quick update:
1. Technicals: 1.1150 remains an important resistance and 1.10 an important support. The 61.8% could also provide some selling pressure and push the price lower.
2. Flows: Strong bullish change in EUR positioning, with NC increasing their bullish bets by almost 4k contracts. Dealers increased their hedge against a strengthening EUR by 10k contracts, and open interest rose by 8k.
This was expected, given the positive news around the EC's joint recovery fund. If optimism among eurozone investors persists, this could be a serious headwind for EUR/USD shorts. I am following the situation and adjusting accordingly.
3. Risk sentiment: This is where it becomes interesting. The USD sell-off in the previous week was mostly fueled by improved risk appetite and increasing stock prices as countries started to lift restrictions. The US disappointed with their reaction to the Hong Kong protests, which again fueled risk-on by week-end.
Next week, we await the US (and other) labour market reports where the full impact of the lockdowns could become evident. Businesses are facing bankruptices and the US lost an unprecedented 20 million jobs in April - the worst loss since the Great Depression. Have the markets fully discounted those numbers yet? Let's see.
4. Correlations: Next post.
Please hit the "LIKE" button if you enjoyed this analysis. Thanks a lot! 👍
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