The single currency continues to hold its own rather well in the face of bearish macro factors...
Although today’s PMI data from Europe was far from great
, the single currency hasn’t responded too negatively when compared against the dollar. The greenback remains undermined as investors continue to pile into foreign currencies because of optimism over a strong global recovery with the developments of the vaccines.
So, watch out for a potential short squeeze rally on the euro, especially with so many people expecting it to fall because of the upcoming expansion of QE by the European Central Bank in December. In other words, there is a risk that sellers who have been too early in the EUR/USD, might be forced to liquidate their positions.
In fact, the EUR/USD has broken out of THIS bull flag pattern after forming a false breakdown attempt below the September low earlier this month:
Source: ThinkMarkets and TradingView.com
Since that failed breakdown attempt, the EUR/USD has been pushing higher and refusing to go down despite the formation of some bearish-looking candles along the way. This is strongly suggesting to me that the bears are getting trapped and that a run on their stops could be the outcome. Thus, I think a breakout above 1.20 handle is on the cards.
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