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Oct 24 - 11:55 AM

EUR/USD - COMMENT-EUR/USD Price Action Should Concern Shorts

By Christopher Romano  —  Oct 24 - 09:55 AM

EUR/USD turned lower on Monday after striking a 12-session high, but shorts should not rest easy as recent price action suggests gains may be on the way.

A key problem for shorts is that even in the face of numerous bearish influences, EUR/USD slipped only marginally lower from Friday and remains more that 3.1% higher from the 20-year low struck in September.

Bearish factors include below-estimate euro zone October PMI from S&P Global nL1N31P0HM, which reinforced recession risks for the continent.

Also, though China's Q3 GDP came in above forecast its COVID policies, property crisis nL1N31P02Y and new leadership team nL1N31P0A7 suggest the prospects for Chinese economic growth, which the euro zone is dependent upon, are dim.

Meanwhile, U.S. interest rates US2YT=RR, EDH3 clawed back some of the steep drops from Friday.

The EUR/USD price action suggests investors are on guard, not least due to speculation that the Fed may soon shift to a less hawkish stance nL1N31M16Z.

Should upcoming U.S. data, particularly CPI, suggest growth is softening and inflation is moderating, that Fed shift may come.

A large EUR/USD short squeeze would then ensue and key resistance near 1.0500 could be tested.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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