EUR/USD: Short squeeze continues – OCBC

July 4, 2024 3:37 pm

The Euro (EUR) continued to build on recent gains, riding on the pullback in the US Dollar (USD) and on increasing odds that Le Pen’s party may not win an absolute majority at the second-round run-off this Sunday, OCBC analysts Frances Cheung and Christopher Wong note.

Le Pen may not win the absolute majority

“So far, French media reports show that more than 200 candidates from both left-wing alliance and Macron’s coalition have pulled out of the race in their constituencies. So just based on polls, a hung parliament outcome may be a base case scenario now. A hung parliament would be a lesser evil for EUR than a right-wing majority, but sentiments can shift between now and Sunday.”

“For EUR, the opportunistic shorts are feeling the squeeze this week. Last at 1.0790. Daily momentum turned bullish while RSI rose. Key resistance at 1.0810 (38.2% fibo retracement of 2024 high to low, 100 DMA). A decisive close above 1.0810 may well get a push higher towards 1.0870 (50% fibo) or even 1.0930 (61.8% fibo).”

“Anything beyond that would require the help of a softer USD. Support at 1.0730/50 levels (23.6% fibo, 21 DMA), 1.0660/ 70 levels (recent low). We should expect to see more 2-way risks with US NFP data in mind on Fri evening. Round 2 results should be in by the time Asia opens on Mon (8 Jul).”

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