EUR/USD's rally off August's low may have stalled as the resurgent EM currency selloff boosts the dollar's safe-haven appeal, but heavy positioning in the greenback still favors a euro bounce. Net-long dollar positions are likely to cause further unwinding on the back of fresh doubts about future Fed rate hikes.
Technicals suggest upside risks remain as well.
EUR/USD is holding above the 10-, 21- and 55-DMAs, a long lower wick is in place on the monthly candle and the pair remains above the key 1.1550/90 support zone.
As long as it holds above that support, bullish risks remain and a test of the 1.1750/95 zone is likely.
A break above that zone puts 1.1850/60 and 1.2000/1.2050 zones in play.
For now, sharp rallies in USD/TRY and USD/ZAR have helped push EUR/USD back through the daily cloud top.
Yield spreads have also helped weigh upon EUR/USD.
Two year DE-U.S.
and DE-IT yield spreads are widening again on the back of EM weakness. But if EUR/USD holds firm, it has a shot at another recovery.
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