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Jun 11 - 05:55 PM

EUR/USD - COMMENT-US Recap: Recent EUR/USD Longs At Risk

By Randolph Donney  —  Jun 11 - 02:00 PM

EUR/USD hit its lowest in six weeks amid euro selling due to perceived greater political risk in the region, doubts about the Fed following the ECB in cutting rates before late in the year since Friday's May payrolls beat and recent spec buyers being broadly underwater.

Now the market is facing a U.S. CPI and the conclusion of the Fed meeting on Wednesday.

The dollar index fell 0.14%, led by EUR/USD, its primary component, which fell 0.24%.

Tuesday's 1.07195 low on EBS marginally pierced important early May lows and the 61.8% Fibo of the April-June advance at 1.0724/21.
A close below those props, particularly after the U.S. inflation and Fed policy updates on Wednesday, would be bearish.

Holding those supports looks more important given that all the push back into net spec long EUR/USD positions over the past four weeks occurred with prices between 1.0735 and 1.0916.

If CPI is at or above forecast and the Fed's economic projections, dot plots and Chair Jerome Powell's presser keep rate cut expectations low until late in the year, EUR/USD could remain under pressure, while dovish takeaways would target the 200-DMA and cloud top at 1.0786-91.

USD/JPY rose 0.1%, shaking off an early pullback in NorAm trading that found buyers at the 55-hour moving average as Treasury yields also came off their lows, but weakened again late in the day.

USD/JPY's recovery from May's intervention-led lows might need a further leg up from Wednesday's U.S. events to push past May's 157.99 high, made on the day of the BoJ's last intervention.
Beyond Wednesday's events, Friday's BoJ meeting will be eyed for any indications of how, when and why it will taper its JGB purchases that attenuate increases in longer-term yields.

Sterling was flat after briefly slipping with gilts-Treasury yields spreads, following mixed UK labor data.
The slip away from its 1.27495 highs came in sympathy with risk-off flows and a modest bounce in the battered EUR/GBP.

But prices held the uptrend line off April and May lows for the second day in a row, and it likely falls to the U.S. CPI and Fed meeting to determine if very similar BoE and Fed rate cut expectations will diverge to either revive the uptrend or trigger a broader slide toward the 100-DMA and kijun at 1.2639/35.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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