The massive build-up in EUR/USD long positions dominated the summer forex market as the dollar slumped, but chart signals projecting a fall to support by 1.1500 nL2N2GL11O could pose a grave threat to those trades.
EUR/USD long positions have probably already diminished since Sept.
18, when they stood at $26.44 bln, according to the latest CFTC data, in light of the euro's 1.8% fall since then.
Still, last week's net long position was much larger than 2018 peaks, which caused a EUR/USD slide from 1.2556 to 1.1301 when it unraveled.
While past performance doesn't predict the future, there are ominous signs.
EUR/USD's abrupt fall from this month's high has taken it down to the lower 10-week Bolli band at 1.1631 last, which may cushion the fall briefly, but September's 1.2014 peak was roundly rejected by the downtrend line from the 2011 and 2014 highs, reinforcing the finality of the recovery from March's pandemic lows.
That recovery sent weekly RSIs to overbought levels.
Those now retreating RSIs have plenty of room to fall, having yet to hit the neutral 50 reading, never mind sub-30 oversold levels.
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