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Jun 27 - 11:55 AM

EUR/USD - COMMENT-Despite Struggles, EUR/USD Gains Seem Probable

By Christopher Romano  —  Jun 27 - 10:05 AM

EUR/USD has been struggling to maintain upward momentum above the 50% retracement of the 1.0774-1.0359 drop and daily cloud base, but factors including U.S. rate movements, spreads, positioning and technicals might soon lift it to 1.0750-1.08.

U.S.
rates EDZ2, US2YT=RR are higher on the session but the recent down trend is intact, and is likely to resume if U.S. May PCE and June ISM manufacturing data come in below estimates this week -- which would drive investors to further lower expectations for the terminal Fed rate.

The dollar's yield advantage is also eroding, despite Monday's U.S. rate gains, with German-U.S.
2-year spreads US2DE2=RR tightening.
This should help underpin EUR/USD.

CFTC data shows rising net euro short positions nL1N2YB2E9.
If EUR/USD fails to make downside progress, some of those shorts are likely to be cut - which would add upside potential for EUR/USD.

Technicals continue to lean bullish too.
EUR/USD is consolidating gains off the June 15 low, the daily RSI is rising, with monthly bull hammer candles in place for May and June.

Options investors are also less wary of EUR/USD downside as risk reversals indicate vol premiums for euro puts over euro calls are eroding.

For more click on FXBUZ


Source:
Refinitiv IFR Research/Market Commentary

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