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BUZZ-COMMENT-Further EUR/USD elastic's stretched, the more it will sting

Credit: REUTERS/THOMAS WHITE

Currency traders have thrown a record amount of money at one EUR/USD bet and they'll probably be encouraged to throw even more. The further they stretch themselves, the greater the snapback will be. It's a question of when there's a pullback, not if there's one [nL1N2FQ07Q].

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Aug 24 (Reuters) - Currency traders have thrown a record amount of money at one EUR/USD bet and they'll probably be encouraged to throw even more. The further they stretch themselves, the greater the snapback will be. It's a question of when there's a pullback, not if there's one .

Traders have turned a blind eye to the crisis and have gambled on stimulus, driving commodities and stocks higher and fuelling this huge bet.

There was very little will to pare longs when EUR/USD almost touched 1.2000. The subsequent record peak for U.S. stocks will support risk appetite encouraging traders to gamble. But there is cause for caution

EUR/USD's rally has slowed markedly. A new trend high was attained in August, but it took weeks to achieve it. It will take a drop to 1.1458 to fulfil the minimum requirement for a technical correction of this year's rise. It's a good time to hedge for that eventuality

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@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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