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Sep 09 - 11:55 AM

EUR/USD - COMMENT-EUR/USD's Short Squeeze May Have Legs

By Christopher Romano  —  Sep 09 - 09:55 AM

EUR/USD pulled back on Friday near the 21-day moving average after earlier rallying toward the 50% Fibo of the 1.0369-0.9864 but it could still extend its recent short squeeze if inflation data tempers hawkish central bank rhetoric.

Big downside surprises to China's August PPI and CPI nL1N30G02B reinforced recent indications that inflation may be moderating while decelerating demand may be slowing economic growth.

The data helped rally riskier assets and drove investors out of the safe-haven U.S. dollar.
Equities ESv1, commodities DCIOc2 gained while most emerging market and major currencies rose versus the dollar.

rates EDH3, US10YT=RR and euro zone rates FEIU3 fell as investors leaned towards central banks taking a less hawkish stance as moderating inflation may give the ECB and especially the Fed opportunities to temper policies.

Technicals reinforce the squeeze, with EUR/USD trading above the 10- and 21-DMAs.
Daily RSI is rising and monthly RSI is now diverging while in deeply oversold territory.

A break of 1.0116/23 resistance-- which include the 50% Fibo at 1.1116 and the Aug.
3 and 16 daily lows-- would intensify the squeeze and target 1.0200/05 and 1.0270/75.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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