Germany’s willingness to compromise on the restructuring of Greek sovereign debt combined with market positioning has allowed for euro bulls to regroup.
Today’s early gains in the euro were a product of the potential compromise. Also contributing to the sharp gains this morning was a shift market positioning. Friday’s CFTC Commitments of Traders report showed a more balanced market standing with leveraged funds shedding almost 9,500 long euro contracts. Today’s rally in the EUR/USD above the 1.4400 mark may have forced some of those newly established short positions to cover as the market is currently positioned short euros and long on the USD.
This morning’s rally was capped below the 1.4425 resistance level off of the May 11th high. A break here and the EUR/USD could rally to the next resistance near 1.4750 from the late April/early May lows. Support comes in at the May 20th high at 1.4345 followed by the 100-day moving average at 1.4040.
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