EUR/USD consolidating above support: boom or bust?

EUR/USD suffered another wave of USD buying and made its way down to support at 1.1712, but couldn’t fall lower. What’s next? Here are three opinions:

Here is their view, courtesy of eFXnews:

EUR: An Important Change In Flows Points To An Approaching Peak – BofAML

Bank of America Merrill Lynch FX Strategy Research notes that its  latest EUR proprietary flows points to an important change suggesting that  EUR risks are balanced in the near-term but could turn negative soon.

“Real money buying has been the main driver of the EUR rally this summer.  However, our latest proprietary flows suggest that this flow has now stopped and that at the same time hedge funds have started selling the EUR rally.

These flows would have been consistent with a weaker EUR if it was not for official sector accelerating EUR buying in the last four weeks,” BofAML clarifies.

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EUR/USD: When & Where To Buy On A Washout In Positioning? – TD

TD FX Strategy Research remains structural EUR bulls and looks for a washout in positioning to offer better chances to get long the EUR/USD.

“For now, the EUR is still tracking as the most expensive G10 currency on our HFFV estimates.

Downside risks are likely to intensify ahead of Jackson Hole, where Draghi might pour a bit more cold water on the EUR rally,” TD adds.

Still, EUR is trading about 3% from HFFV  so we would look to buy into dips near 1.14 ahead of the German elections next month,” TD advises.

EUR/USD: Not An Attractive Buy Around Current Levels – Credit Agricole

Credit Agricole CIB FX Strategy Research argues that  further EUR/USD gains from here are unlikely to prove sustainable.

“It will be external factors such as Fed rate expectations that drive the pair. As such all eyes will be on Fed speakers and July CPI. In both cases we see limited scope for disappointments. With policy differentials not supporting a further move to the upside, caution is warranted,” CACIB adds.

“With speculative oriented investors’ selling interest in the single currency rising and as there is limited scope of policy differentials diverging further to the benefit of majors such as EUR/USD,  we advise against buying at these levels.

If anything, still elevated long positioning should leave the currency subject to downside risks,” CACAIB argues.

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