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Dec 08 - 11:55 AM

EUR/USD - COMMENT-Fearless EUR/USD Longs Shrug Off ECB And Other Risks

By Christopher Romano  —  Dec 08 - 10:45 AM

If traders betting on EUR/USD gains are nervous about this week's ECB meeting -- or the EU budget impasse and Brexit -- they're not showing it.

Fresh off a one-month rally, longs appear confident as they consolidate those gains, an approach which indicates EUR/USD will eventually resume its rise.

EUR/USD received a fleeting lift after Britain said it would pull clauses in a draft law that breach the Brexit Withdrawal Agreement after it clinched a deal with the European Union over implementing of the treaty nS8N2I904G.
EUR/USD's lift was limited though as Brexit trade talks remain at an impasse nB5N2GM004.

The upcoming ECB meeting could be putting EUR/USD's rally on hold as investors are concerned euro strength could drive the central bank to take action.
Intervention or a rate cut seem unlikely though.
The ECB is expected to add accommodation in some form, which could actually fuel risk-taking and thus could drive EUR/USD higher nL1N2IO0HK.

European Union budget and recovery fund negotiations remain an issue nW8N2GV02J and likely contribute to the pause in EUR/USD's rally.

Despite those risks and an increase in net-long euro positions nL1N2IK2OK EUR/USD corrective pull backs have been limited.
The meager corrections suggest dip buyers are lurking and confidence for higher EUR/USD levels remains.

Should risk sentiment not deteriorate investors will stick with riskier bets, which is likely to drive EUR/USD higher.
December's monthly high and the 1.2200/10 zone are impediments.
If they break a 1.2500/50 test could be possible.

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Source:
Refinitiv IFR Research/Market Commentary

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