Minnesota Hottie Nafisa Teague

EUR/USD. Holding above 1.25

EUR/USD (1.2582) is up overnight, holding onto gains from the sharp rally last Thursday. Some ascribed that move to a huge short EUR / long gold position unwind, while others indicated that it derived from an increased focus on the downside risks for the US economy. Still others noted that the Euro Zone dodged bullets last week with Spain issuing debt and the ECB’s 1yr loan facility expiring without incident. Bloomberg has published a feature article this morning highlighting various bank strategists who believe that EUR/USD could still trade towards 1.15 this year as debt problems and austerity weigh on the European currency.

Technicals:

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Trend: Daily higher; Weekly higher.
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Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.
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Support / Resistance Levels: Support for EUR/USD lies at 1.25 (psychological), 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2612 (Jul2 high), 1.2672 (May 21 high), 1.3094 (May10 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).

Positioning:

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The CFTC, EUR, non-commercial, net position (-66K) deteriorated slightly, in keeping with the price action through last Tuesday.
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The risk reversal (3m, 25delta) ticked higher on spot’s hold above 1.25.
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Implied Vol (3m) slipped overnight on the back of spot’s recent gains.

Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 5yr yield spread (positive), the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).