EUR/USD which traded in a range of roughly 1.05-1.10 for most of this year probably rose into a higher range following July's surge, with the new range likely closer to 1.08-1.13.
The exuberance of speculators who drove EUR/USD to a 2023 best at 1.1276 EBS in July has been followed by a period of profit taking that has pushed the pair back down to 1.0874 in August.
In the process EUR/USD has flipped from an overbought situation toward an oversold one - heightening the likelihood that the base of a new range develops around the bottom of the 20-day Bollinger Bands, currently 1.0860.
For this trend to hold, which has been supported by a strong will to gamble that's seen longs exceed $25 billion, it is vital that bullish equity trends remain intact.
The current reversal has been accompanied by a pullback for stocks but like the small reverse for stocks, EUR/USD's correction is modest representing roughly 23.6% of the prior rise since September 2022.
The reverse for stocks is even smaller in comparison, and the drop for MSCI's world index is already stretched near the base of the 20-Day Bollinger Bands.
Both trends are apt to continue with bigger gains for stocks supporting a EUR/USD rise back toward the peak of the new range.
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