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Oct 28 - 11:55 AM

EUR/USD - COMMENT-Risk Aversion Puts EUR/USD On The Run, Deeper Losses Possible

By Christopher Romano  —  Oct 28 - 10:10 AM

EUR/USD tumbled on Wednesday as risk aversion emanating from European coronavirus restrictions and U.S. election uncertainty put bulls on the run, ending a consolidation phase and increasing the chances of deeper losses.

Before the break lower, EUR/USD had been consolidating gains from the rally off the Oct.
15 low and threatening to rally above the 61.8% Fibo of 1.2014-1.16125.

But the return of severe German and French pandemic restrictions nL1N2HJ0QL threaten the fragile euro zone economic recovery, while potential U.S. election uncertainty -- including a possible contested result nL1N2HI0YT -- are adding to safe-haven flows.

German yields took a particularly hard hit as investors snapped up government bonds, increasing the dollar's yield advantage.

EUR/USD fell from the 55-day moving average and daily cloud top and pierced the 10- and 21-day moving averages, breaking the rising channel base on daily charts.
Daily and monthly RSIs indicate bearish momentum, and the 23.6% Fibo of 1.0636-1.2014 and September monthly low are now in play.

Options indicate investors expect EUR/USD downside.
EUR/USD risk reversals EUR1MRR=FN show 1-week and 1-month vol premiums for calls exceed puts while 3-month call premiums are close to zero.

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Source:
Refinitiv IFR Research/Market Commentary

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