💶Euro In A Downtrend Break Faces Headwinds: Cable FX Macro
- Rosbel Durán
- 7 hours ago
- 1 min read
The long-term downtrend seen for the last fifteen years was finally breached earlier in the year as prospects for the euro area were translated into EUR bids. The EUR/USD performance has not only been driven by USD weakness; days when the dollar outperforms see the euro strengthen relative to the G10.
However, if you have been around for a while, you and I know that markets tend to overreact to the innovations of information. Cooler heads tend to have a more balanced view, and sometimes this comes after the initial information has been processed.
Goldman Sachs flagged risks on German bonds as the current yield in the 10-year benchmark has not priced in the size of the fiscal package and the future supply. This is likely to raise FV models pointing to a higher EUR/USD.
Ahead, we have the psychological 1.2000 level, which coincides with the 200WMA. We have not seen the pair close a month above 1.20 since 2021 and above the moving average since 2015.
Short-term option premiums show an unwinding of topside interest. 1w tenor in EUR/USD is now 28.5bps puts over calls after having hit 100bps calls over puts in late June.
Whether we have a technical correction or a test of the WMA is hard to call, but the room for upside is starting to look limited from a technical perspective.
