Date: 21 Sep 2018

Traders may recall that the move up in EURUSD from early November 2017 into the start of January 2018 occurred despite the fact that US Treasury yields were buoyant. So, the current situation where EURUSD has again moved higher even though US Treasury yields have again been ticking higher, and with the Fed still set to hike rates next week, is not without precedent. That, of course, doesn’t mean the move will continue but it might give euro bulls some degree of comfort. Then there are the technicals. Analysts at IFR wrote on Thursday that “Techs suggest the [EURUSD] rally will extend. [Relative Strength Indexes] are biased up and August’s bull hammer candle has been followed by upside follow-through in September.” It’s IFR’s view that “A break above 1.1800 should intensify the rally. Bulls would then eye 1.1850/60.” Traders may also wonder if the July 9 high of 1.1790, which wasn’t breached in a flat Asia session today,  may also exercise some influence on market psychology. Then there’s the issue of a plethora of expiries in EURUSD today at 1500h UK time. With 1 billion euros of expiries said in the 1.1765-75 range and another almost 750 million euros at 1.1800, traders might wonder whether those could constrain the price action until their expiry at 1500h. Euro bulls may be on the front hoof but there are a number of factors to consider.

by Neal Kimberley, External Currency Analyst