FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
FxPro information and reviews
HFM information and reviews

High conviction contrarian - where to sell EURUSD this week?

26 August 2022 Written by Chris Weston  Pepperstone Head of Research Chris Weston

The fundamentals in EURUSD remain skewed to further a push lower, as the US (and Canada) remains the most attractive investment destination of the G10 economies. That said, I’ve been impressed with how EURUSD has absorbed so much bad news, and the word ‘resilience’ has come up once or twice.

Perhaps the market has already gone some way to pricing in a dark scenario. EU nat gas prices have had a dramatic shift higher, but inventory levels are high and should see Europe through the winter - this view would be re-assessed if the Nord Stream 1 pipeline doesn’t resume full flow on 2 Sept, or we hear of bitterly cold weather patterns emerging.

Either way, EURUSD is finding a bid, although a deeper dive this is more a USD story than broad love for the EUR – case in point, EURAUD has smashed through multi-month support at 1.4370 and short EURAUD is the best momentum play at this point - even EURGBP holds a range of 0.8500 to 0.8400. EURJPY is -0.4%.

High conviction contrarian - where to sell EURUSD this week?

Part of the USD selling can be explained by a stronger CNH (yuan) and it feels like a lower USDCNH is driving the show today – a new round of stimulus from Chinese authorities and a far stronger PBoC CNY (yuan) ‘fixing’ (at 11:15 AEST) has seen USDCNH trade lower and this has resonated in USD selling across the board.

EURUSD 1-week implied vol sits at 10.28% which is the middle of its 12-month range and implies a range of 1.0094 to 0.9859 over the week from current spot prices.  While the 1.0110/20 area certainly interests, if the USD bears really make a play into next week, the key area to look for supply and possibly counter-moves is 1.0190 to 1.0200 – this is where we see the top of the channel EURUSD has held throughout 2022 and the 61.8% fibo of the recent 1.0368 to 0.9900 sell-off. If it is to get to test either of the range extremes then it may take few days, but this the higher probability fade zone.

On the skew side, EURUSD 1-week call volatility trades in line with put vol so the options market is fairly balanced on where the next move plays out – ahead of Powell’s speech at Jackson Hole (JH) positioning will be key and again we see the market running a decent long USD exposure, certainly from leveraged funds. Our own client position is currently short USDs, with 66% of open positions in EURUSD held long – retail is often uber aggressive and contrarian, but there is a general bias for the USD to run lower into JH.

One to watch, but rallies into 1.0190 would be where the elastic band snaps back, but this would be driven by the market reducing positioning into and post-JH and importantly a lower USDCNH.


Share: Tweet this or Share on Facebook


USD & Yields higher, Yen, Stocks & Gold sink
USD & Yields higher, Yen, Stocks & Gold sink

A blockbuster NFP on Friday (571k new jobs vs 185k) & strong Services PMI (55.2 vs 50.5) has lifted the Dollar and Yields, sinking Stocks and Gold (the 3 mth Gold rally is over)...

7 Feb 2023

Gold traders appear hesitant
Gold traders appear hesitant

Gold finally broke out of the consolidation after being range bound for nearly 11 days. The correction to the downside was expected as gold traded in the overbought territory...

3 Feb 2023

Do safe haven currencies still exist?
Do safe haven currencies still exist?

At the end of last year, Swiss National Bank (SNB) President Thomas Jordan told news media that both the Swiss franc and the US dollar could be considered safe havens...

3 Feb 2023

USD Index appears bid and approaches 102.00 ahead of Payrolls
USD Index appears bid and approaches 102.00 ahead of Payrolls

The index looks to extend the post-ECB rebound. January Nonfarm Payrolls will take centre stage later. Other key data includes the ISM Non-Manufacturing...

3 Feb 2023

USD Index appears depressed post-Fed, breaches 101.00
USD Index appears depressed post-Fed, breaches 101.00

The index drops to 10-month lows near 100.80. The dollar remains on the defensive post-FOMC event. Initial Claims, Factory Orders next of note in the docket...

2 Feb 2023

Can The GER40 Keep Its Strength?
Can The GER40 Keep Its Strength?

As attention turns to the approaching Fed and ECB announcements, the GER40 index maintains stability near its best level since September last year...

2 Feb 2023

Editors' Picks

FXCM information and reviews
ActivTrades information and reviews
RoboForex information and reviews
MultiBank Group information and reviews
MultiBank Group
Libertex information and reviews
Vantage information and reviews

© 2006-2023 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.