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 weekly

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


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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