US Markets

BUZZ-COMMENT-EUR/USD bears face headwinds but downside risks remain

Credit: REUTERS/Thomas White

EUR/USD erased much of its post-Fed losses before U.S. trade started, but risks of a further fall remains, which could keep euro bears in the game.

Sept 17 (Reuters) - EUR/USD erased much of its post-Fed losses before U.S. trade started, but risks of a further fall remains, which could keep euro bears in the game.

Equity markets ESv1 are consolidating the drop from their early-September peaks, with momentum remaining bearish, and should fall once the consolidation phase ends. That would sour overall risk sentiment and boost the safe-haven dollar.

EUR/USD bears can take comfort from real yields on U.S. Treasuries. Despite the Fed's pledge to leave rates on hold through 2023 10-year TIPS yields US10YTIP=RR remain buoyed and look poised to break higher. The dollar and 10-year TIPS are highly correlated.

Options indicate downside risks are increasing. EUR/USD risk reversals EUR1MRR=FN show vol premiums for calls over puts continue to erode while expiries with strikes below the current market are being bought .

EUR/USD bears have work to do if they want greater control though. They'll need a close below the trend-line off the Aug. 3 low as well as a break of the 1.1685/1.1710 support zone. EUR/USD longs are likely to exit positions should those moves occur and a test near 1.1520/30 is then likely.

For more click on FXBUZ

eur/usdhttps://tmsnrt.rs/32DZHCA

EMINIshttps://tmsnrt.rs/3c7RSrN

USDTIPhttps://tmsnrt.rs/3hGw8o2

(Christopher Romano is a Reuters market analyst. The views expressed are his own)

((christopher.romano@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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