Toss a EUR-Up or Down?

This EUR move is not even a classic case of having to book profits believing that we are witnessing the single currency’s limited potential short term objective. The EUR seems to have run out steam this morning, as investors wait for market tidbits from the debt talks between Greece and its private creditors. Whatever the outcome, it will act as the catalysts for the EUR’s next move, albeit up or down.

This has been a positive news event week for the markets most “crowded trade”. Being short of the EUR outright or on the crosses has been painful over the past five trading sessions. Many of the weaker shorts have exited because of the limited EUR pullbacks. Several successful debt auctions and signs of further action from EU, IMF policymakers-’designed to help avoid a chaotic default’-look to be progressing. However, it is the lack of concrete news from the Greek creditor debt talks, which have entered a third day, that is keeping markets tense for a move in either direction.

Option and sovereign sales ahead of the EUR’s 1.30 handle this morning has temporarily helped cap the topside. Top calling is a difficult gig, especially given the recent squeeze and “this” one directional negative market sentiment mix. The market should now expect further stop losses to have entered the fray. From a technical perspective after moves like this, stop-losses will have begun to be layered below, accelerating selling again in the high 1.28’s. The ease at which the EUR/USD has slipped through the 1.29’s certainly highlights the vulnerability of the single currency at these elevated levels. The bears are pinning their hopes on the Greek debt talks for signs on the next leg of the EUR decent.

The 21-MDA remains at 1.2870-through these levels the market will expect momentum to gather because of the tight stop-losses. Now we are back to ticker watching!

Forex heatmap

Other Links:
EUR Bulls Covet This Squeeze

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell