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EUR/USD: Cannot exclude risk of a short squeeze - TDS

FXStreet (Bali) - TD Securities remains a little conflicted on the near-term outlook for EURUSD, noting that the broader trend is clearly down, but a short squeeze should not be ruled out.

Key Quotes

"We are loathe to ignore the signs of demand for EUR on dips—which is a little more evident on the weekly chart, below—and cannot exclude the risk of a short-term squeeze higher through the High 1.34s/low 1.35s."

"But the broader trend lower remains well-entrenched in the market and the underlying trend momentum on the daily studies is still bearishly positioned."

"Our optimal scenario is for price to continue respecting a bearish consolidation (triangle) on the daily chart, which will point to a resumption of the underlying trend lower on a break under 1.3340. Gains through the low 1.34s will raise the risk of a squeeze higher through the upper 1.34/low 1.35 zone, however.

"A collection of weekly “hammer” signals underscore the upside risks facing EURUSD in the near-term. The broader pattern of trade here still points to more medium/longer-term weakness for EURUSD—a major trend reversal signaled by the weak price action overall in May, the bull trend channel breakdown—but the stabilization the in the market in the past few weeks around retracement support is hard to ignore."

"We still favour fading short-term EURUSD gains and continue to believe that medium-term trends are geared towards sub-1.30 levels in weeks ahead. The risk is that those short-term rallies extend through to the low 1.35s, however."

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