EUR/USD struck an eight-session high in early-U.S.
trade, matching a two-year peak hit earlier in August but also approaching levels that could herald a reversal.
EUR/USD is closing in on 1.2000, which should constitute major psychological resistance and massive option barrier defense nL1N2FX07Y.
The advance may be helped by comments from Fed Vice Chair Richard Clarida nL1N2FX0KR, who didn't rule out yield caps.
However, positioning could bolster 1.2000 resistance with CFTC nL1N2FU1WU net-long euro positions at record levels.
Profit-taking into 1.2000 could possibly prevent bulls from breaking it.
Meanwhile, the dollar index =USD is nearing key 91.70/92.00 support, where the April 2018 monthly high, May 2018 monthly low and 76.4% Fibo retracement of the 2018-2020 rally sit.
Dollar shorts might take profit there, potentially driving a dollar rally.
Shorts should also consider U.S. Treasury 10-year TIPS yields, which are highly correlated with the dollar, as they near the August low.
If they rebound, the dollar could follow.
EUR/USD longs might have to be quick to exit if 1.2000 holds as a quick correction could ensue.
Should dollar and TIPS yield supports break, EUR/USD could rally above 1.2000.
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