Aug 27 (Reuters) - EUR/USD is consolidating close to the highs of a major rally, a bullish sign. August's consolidation has given option traders time to adjust and while 1.2000 remains an important level, an explosive break above that point is as unlikely now as it was likely in July.
Speculators are now sitting on a record long, and this week's action suggests that top pickers have re-established longs .
Option traders have been buying, too. In July the lack of option expiries over 1.2000 sent a worrying signal about the option equivalent of a short squeeze (short gamma). That situation has changed.
Today, there are many expiries at 1.2000 and decent cover up to 1.2200. Traders can no longer expect option traders to do the heavy lifting over 1.20 and a quick break to levels over 1.2200 is unlikely.
Those long must respect 1.2167. It's the peak of the monthly Ichimoku cloud. The 50% retracement of the drop from 1.3995, the 2014 peak. It won't break easily when speculators are hugely long.
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(Jeremy Boulton 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.