BUZZ-COMMENT-EUR/USD bears face headwinds but downside risks remain
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.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.