Nov 25 (Reuters)EUR/USD is on course to test 1.1040 – which is a 76.4% retracement of the major rally from the March 2020 low – and it may do so in December when there will be less liquidity which could result in a disorderly sell-off should 1.1040 break.

Option traders and many companies will have utilized 1.1000 for hedging purposes and are sure to have been influenced by economists who think EUR/USD rises.

If EUR/USD instead cracks a level that when broken would suggest it drops to 1.0636, at least, there will have to be a big readjustment of risk.

If conducted in December, this could lead to great volatility amid diminishing liquidity, resulting in a rush to sell and far fewer buyers.

Speculators who pared bets on a rise are yet to back a drop, with just 0.5 billion staked on a fall. Considering this sector has often backed drops to the tune of 20 billion, the potential for change is enormous.

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Summit Rock Advisors

EURUSD weeklyhttps://tmsnrt.rs/3nOZO8Y

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source: Nasdaq

Summit Rock Advisors

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