EUR/USD traders are prepared to gamble heavily on a rise when they wouldn't back a drop.
This extreme bias is an issue that currently risks a more substantial decline for a currency pair that has clearly peaked this year.

Since September last year traders have been buying EUR/USD and by the end of January they had established the largest bet on a rally since February, 2021

What makes this big bet more remarkable is that traders never wagered heavily on a drop when the pair were falling, and the drop that followed the announcement of the Fed's bond taper in June, 2021 and September, 2022 was roughly twice as large as the following rally.
Bets on a drop never exceeded 6 billion dollars compared to more than 20 billion dollars wagered on a rally.

Further to this, the narrowing of eurozone and U.S. interest rate differentials that have supported the rally from 0.9528 to 1.1034 won't close the gap.
If futures markets are correct, the rate gap will remain 1.5% in favour of the dollar for the next 12 months.

Traders who can be certain their bets will be undermined by interest rates might heed February's plunge to 1.0533 and take profit.

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