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Jul 08 - 11:55 AM

EUR/USD - COMMENT-EUR/USD Longs May Be Optimistic After Weathering Risk-Off Storm

By Christopher Romano  —  Jul 08 - 10:35 AM

After weathering Tuesday's risk-off storm EUR/USD appears set to resume its upward trek with the help of supportive technicals, positioning and market views on inflation.

EUR/USD tested the 21-day moving average as well as former trend-line resistance from the topside during Tuesday's selloff, but bears' failure to sustain a move below those supports could allow them to act as a springboard for gains.

Though CFTC data nL1N2ED1VT showed a sharp reduction in net-long euro positions, EUR/USD continues to trade near recent highs.
The position reduction may also bolster expectations of EUR/USD gains as it could indicate less profit taking selling pressure from longs.

With euro zone 5-year/5-year inflation-linked swaps EUIL5YF5Y=R trading near recent highs and poised to rise further once they complete their current consolidation phase following the March-July rally, inflation views should also support EUR/USD.

Meanwhile, daily and monthly RSIs imply upside momentum remains intact, the 55-DMA crossed above the 200-DMA and EUR/USD is being supported by the 10- and 21-DMAs.

The 1.1345/55 zone is an impediment for EUR/USD longs but, should it break, tests of June and March monthly highs would be likely.
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Refinitiv IFR Research/Market Commentary


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