EUR/USD traders have much work to do, which is an issue
Aug 20 (Reuters) -EUR/USD traders have much work to do if they are to force the upside break they hope to see, which is an issue as the more euros they buy, the greater their restraint on a rise.
For certain, those buying will sell. What is unknown is whether those buying eventually sell to book profits, or whether an unexpected reverse forces them from their bullish positions.
There is ample room for bullish bets to grow as the net bet on euro rising is little more than one tenth of the record bullish wager attained in 2020.
The ballooning current account surplus and cheaper oil are fuel for bigger demand and an imminent Golden Cross buy signal may be the biggest motivator for buyers.
That said, EUR/USD is yet to rise above last December's 1.1139 high and is far from last year's 1.1276 peak, and the 61.8% retracement of the drop inspired by a U.S. tightening cycle at 1.1272.
The 100-MMA is 1.1221 and 55-MMA is 1.1107 and the rally is already stretched toward the top of daily, weekly and monthly Bollinger bands.
Lower U.S. interest rates - widely seen as the main driver of demand - have done little to change the rate differential that continues to weigh EUR/USD with the one-year EUR/USD forward swap 168 points, compared to almost 200 points at the start of this year.
What will impact the euro is the eurozone interest rate which is expected to drop toward 2% in early 2026, seriously undermining the carry trades which have been a big source of demand for the single currency this year.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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