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Thomson Reuters
Oct 04 - 02:36 PM
EUR/USD - COMMENT-EUR/USD Downside Risks Grow After Hawkish Powell
First appeared on eFXplus on Oct 04 - 11:25 AM

Today's EUR/USD bounce off its new short-term low is unlikely to mitigate the growing risks that it will revisit its weakest levels of the year hit back in August. Fed chief Powell has shifted the market's focus toward potentially higher rates after saying that policy tightening may have to go beyond neutral nN9N1LO00F.
U.S. Treasury yields have broken to new trend highs on unusually large volumes, which suggests the move is likely to continue.
The yield gains have pushed German-U.S.
spreads to new trend wides, limiting EUR/USD's ability to rally.
Italy's budget mess will hinder EUR/USD further ( Click here

), deterring traders from establishing new longs.
Positioning is also a growing bearish risk for EUR/USD.
Typically contrarian retail accounts have been building net-long EUR/USD positions and have added to them as the new low was set.
EUR/USD will need to overcome resistance near 1.1545/55 and 1.1600/30 to reduce the risk of further losses. Otherwise, it is likely to test the 2018 low.

chart: Click here

Thomson Reuters IFR Markets


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