FXStreet (Guatemala) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank explained that together, the worsening fundamental picture combined with diverging yields and building risks in the periphery for EUR/USD>, warns of shifting fundamental drivers.
“Sentiment is already fairly negative—with the CFTC reporting a net short of ‐$10bn and the consensus forecast for year‐end is 1.32 (ours is 1.30) and 1.28 for year‐end 2015 (ours is 1.25), accordingly a downward shift in the fundamental is likely to open up further EUR downside."
"The one warning signal is coming from the option market, where risk reversals suggest traders have been protecting against potential EUR upside pressure since the beginning of June. Over the next few sessions we’d expect this to fade but it is worth monitoring."
"EUR/USD short‐term technicals: mixed—technicals warn of a temporary range between 1.35 and 1.37—which we have noted several times over the last few weeks; current downside pressure developing in spot from the fundamental side is not yet reflected in the technical patterns. Accordingly, we favour playing the 1.35 to 1.37 range, with a current preference for short term traders to position for a downside test of this range."