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The euro "leads" and the pound "straights"! Is the prelude to the outbreak of non-US currencies already revealed?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Group]: The euro "leads" and the pound "straights"! Is the prelude to the explosion of non-US currencies revealed?". Hope it will be helpful to you! The original content is as follows:
On Wednesday (September 17), the euro fell slightly against the US dollar and the euro pound. On Tuesday, the overall ZEW economic prosperity index in Germany and the euro area significantly exceeded market expectations, pushing the euro to lead the performance among major currencies.
After the data was released on Tuesday, the market's expectations for the ECB's further interest rate cuts after this week's interest rate meeting have cooled significantly - it should be noted that the ECB had clearly maintained interest rates in the interest rate meeting last week, and stated that the current economic risks are "trend to balance" and the overall outlook is "in a benign state."
At the same time, traders are planning ahead for the dovish interest rate cut operation launched by the Federal Reserve in the early morning of Thursday morning, Beijing time, which directly led to a weakening of the US dollar. Affected by the resonance of the above factors, the euro-USD trend is more upward than the pound-USD, and the continued lag of the pound further boosts the euro-USD rise.
The euro showed a strong operating pattern on Tuesday, with the core driving force xmserving.coming from the overall ZEW economic prosperity report of Germany and the euro zone. In light of the trend of the European Central Bank meeting last week, when the bank kept interest rates unchanged, it clearly stated that economic risks "trend to balance" and the outlook is "beautified". The market's expectations for further interest rate cuts have converged significantly, which further strengthened the market consensus of "the current easing cycle may have ended."
At the same time, traders made advance arrangements for the Fed's dovish interest rate cut operations later today, and the US dollar was under pressure and weakened. Against this background, the euro performed significantly better than the pound and the US dollar.
Euro-USD technical analysis
The daily chart of the euro-USD has been mentioned many times before, forming a bullish flag.
The key tips are neededYes, the 2-day relative strength index (RSI) at the euro-USD daily line level has entered the overbought range, which means that there may be a risk of excessive extension in the short term. However, the 14th-day relative strength index of this currency pair has confirmed the upward trend simultaneously and has not yet reached the overbought threshold. In this context, if a pullback occurs, it may constitute an opportunity for the bulls to intervene. In terms of xmserving.comprehensive pattern integrity, the euro is expected to reach the bullish flag target (about 1.20).
In-depth analysis of the Euro-GBP Trader's Position Report (COT)
Although the Weekly Position Report (COT) contains special Euro-GBP Futures data, the market liquidity of this product is relatively low and the data reference value is limited. In order to capture market sentiment more accurately, an alternative analysis indicator with higher liquidity can be constructed by "euro-dollar futures position data minus GBP futures position data".
This method can effectively reflect the long-short exposure xmserving.comparison between the euro and the pound and the US dollar, providing a more reliable emotional reference for trading decisions.
It can be seen from the chart of substituting positions of the euro against the pound that net long exposure has continued to rise due to the dual driving force of the active increase in long holdings and the passive reduction of short holdings. This trend is highly consistent among large speculative institutions and asset management institutions, reflecting that the market has formed a consensus on the bullish sentiment of the euro against the pound.
Although there is some view that asset managers' net long exposure is close to the extreme range of sentiment, in the short term, there is still room for further increase in bull bets. In addition, given that the current euro-GBP price is still well below its 2023 high, the probability of the pair breaking through its 2025 high is gradually rising in the xmserving.coming weeks.
Euro-GBP Technical Analysis
Daily chart shows that the euro-GBP has a clear upward trend. After successfully maintaining the 50-day index moving average, momentum has xmserving.completely turned bullish.
Price trends form a series of high and low points converge with each other. Although they are not textbook-style standard symmetric triangles, they already have similar structural characteristics. Even so, the current momentum has been xmserving.completely synchronized with the dominant upward trend;
xmserving.combined with the latest position report, it shows that "traders' bullish sentiment towards the euro against the dollar is significantly stronger than that of the pound against the dollar." If the price pulls back within yesterday's volatility range, it may become a good opportunity for euro bulls to intervene, with the target directly pointing to the 2023 high and the year's high (about 0.8751).
Traders also need to focus on the key position of 2024 opening price of 0.8660, which may constitute an important support in the short term. As long as the euro and pound remain above the recent fluctuation low of 0.8631, the bullish bias can remain unchanged.
The core question at present is: is this wave of rise a phased rebound before a sharp downward trend, or a trend start signal that breaks through the 2025 high? Judging from the futures position data, the latter is more likely.
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