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Feb 01 - 11:55 AM

EUR/USD - COMMENT-EUR/USD On Verge Of Much Deeper Fall

By Christopher Romano  —  Feb 01 - 10:46 AM

EUR/USD could be on the verge of a deeper fall after sliding below the 55-day moving average and daily cloud top on Monday, as positioning, interest rates and technicals warned of more losses.

CFTC data nL1N2K43AV showed net-long euro positions increased as EUR/USD rose during the reporting period.
EUR/USD has since dropped and euro longs could decide to exit those positions without fresh gains soon.

Steepening of 10-year/2-year and 10-year/3-month U.S. yield curves, which EUR/USD is positively correlated to, has halted near key resistance.
Curve flattening would put EUR/USD under bearish pressure since flattening curves can signal slower global growth.

Technicals highlight downside risks.
Daily and monthly RSIs are falling, implying bearish momentum.
A long upper wick formed on January's candle, suggesting EUR/USD's rally is faltering and bears are gaining control.

The 38.2% Fibo of 1.1602-1.2349 rally and the 1.2040/60 zone remain key supports.
A break could trigger stops and longs might exit positions.

EUR/USD bears might then target the daily cloud base and 1.1905/30 support, a break of which could herald a test of major support near 1.1600.

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Refinitiv IFR Research/Market Commentary


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