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Aug 23 - 01:55 PM

EUR/USD - COMMENT-The Squeeze Is On But EUR/USD Sellers Lie In Wait

By Christopher Romano  —  Aug 23 - 11:51 AM

The squeeze was on in EUR/USD on Monday as it extended a bounce from the previous session's nine-month low, but the longer-term down trend remains intact and sellers are likely lurking near key Fibo retracements and resistance levels.

Improved risk sentiment drove investors out of safe-havens and into riskier plays, helping to extend EUR/USD's short squeeze in price action that generated bullish daily technical signals.

Daily RSI diverged on Friday and rose on Monday, implying short-term upward momentum.
EUR/USD also broke above the 10-day moving average, lending credence to the short-squeeze scenario.

Monthly technicals remain bearish, however, and suggest the squeeze will be short lived.

Investors expectations for Fed and ECB rate moves should help to limit the squeeze.
Eurodollar and Euribor prices out to December 2023 indicate investors expect the Fed to be more aggressive than the ECB will be with rate hikes.

Investors looking to sell a EUR/USD rally likely lurk near the 23.6%, 38.2% and 50% Fibos of the 1.2266-1.1664 decline.
Resistance from those Fibos will be reinforced by daily highs in the June-August period which align near the Fibos.

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Refinitiv IFR Research/Market Commentary


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