EUR/USD longs are in control after U.S. retail sales declined for the first time in seven months nLNSGLEFC6nLLAGLEF3V, but caution ahead of the Fed's meeting later this month will keep them on a short leash.
The downside miss resulted in broad dollar weakness as U.S. Treasury yields dipped while Eurodollar and fed funds futures prices rallied.
The data also increased the probability of a 25bps Fed cut on October 30 to nearly 85% FEDWATCH.
EUR/USD rallied above the daily cloud base, 55-DMA and briefly pierced the 76.4% Fib of 1.1109-1.0879.
Hope for a Brexit deal nL2N2710NE also helped EUR/USD and a deal would spur more gains EUR/USD.
Technicals support the rally.
RSIs are rising, a bull hammer formed on Oct. 15 after the topside of the 10-DMA held and the bull trend off October's low remains intact. However, options markets point to limits on gains.
Risk reversals show vol premiums for EUR calls, suggesting investors are hedging for gains nL2N27109R.
Options also suggest the 1.1100 area could be the limit until risks from the ECB and Fed pass.
Daily highs from Sept. 13 and Aug. 27 sit at 1.1109 and 1.1116 respectively and those daily highs might be the furthest longs are able to push EUR/USD for now.
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