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Jul 04 - 05:55 AM

EUR/USD - COMMENT-Money Markets Provide Certainty On Where EUR/USD Is Heading

By Jeremy Boulton  —  Jul 04 - 03:55 AM

Money markets provide certainty about EUR/USD direction.
Unlike EUR/USD, which has been surprisingly static since the Fed's big interest rate hike in June with traders reluctant to sell, there has been clear divergence between U.S. and eurozone interest rates and that big split weighs EUR/USD. nL1N2YL0AW

The divide equates to 22 EUR/USD pips per month or 288 per year.
In February, before the first Fed hike, the one month EUR/USD forward swap was around 7 pips, and one year 18 pips.
Before taper talk emerged in 2021 the one year swap was 88 pips.

EUR/USD has dropped 1.2256-1.0349 since the Federal Reserve outlined a plan to taper last June but has been remarkably stable for several months with traders often betting a lot of cash on rally and rarely venturing short.

EUR/USD has never rallied far and it keeps slipping back towards the low inspired by U.S. policy.
The trend is clearly defined and those short earn via interest rates.
If traders embrace the trend, EUR/USD could fall much further.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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