EUR/USD looks set for a big boost from a surge in risk aversion that's likely to stem from the plunge in the value of China's yuan and stock market.
The euro is usually perceived as a relatively safer asset but traders have recently steered clear of the single currency due to political uncertainty in Italy and Germany.
However, traders have now significantly adjusted their EUR/USD bets in relation to these political worries, slashing longs from EUR 18.8 billion to 4.5 billion since the end of April.
With most analysts thinking that Germany's Chancellor Angela Merkel will survive the clash nL8N1TX09B, traders look poorly positioned for what's happening in China.
Events in China are more recent than the political uncertainty that has dogged the euro this year, with Chinese stocks dropping around 14 percent in the last month and yuan's trade-weighted value plummeting 3.4 percent in the last 11 days.
When China devalued the yuan by 2.1 percent in August 2015, stocks fell 28 percent and EUR/USD rallied from around 1.09 to 1.1715 in around two weeks.