EUR/USD Rate Trades to Fresh 2020 High Ahead of Fed Rate Decision

EUR/USD RATE TALKING POINTS

EUR/USD trades to a fresh 2020 high (1.1699) ahead of the Federal Reserve interest rate decision on July 29, and current market conditions may keep the exchange rate afloat as the Relative Strength Index (RSI) sits in overbought territory.

EUR/USD RATE TRADES TO FRESH 2020 HIGH AHEAD OF FED RATE DECISION

EUR/USD has taken out the March high (1.1495) as a bull flag formation panned out in July, with the RSI helping to validate the continuation pattern as the oscillator bounced along trendline support to preserve the upward trend from March.

In turn, EUR/USD may continue to carve a series of higher highs and lows as long as the RSI holds above 70, and the bullish price action may persist going into the Federal Open Market Committee (FOMC) meeting as the appreciation in the exchange rate continues to be accompanied by crowding behavior in the US Dollar.

The latest update to theIG Client Sentiment report shows the ratio of traders short to long is now at 2.55 to 1 as only 28.20% of traders arenet-long EUR/USD, with the crowd net-short the pair since mid-May. The number of traders net-long is 3.58% lower than yesterday and 7.52% higher from last week, while the number of traders net-short is 3.04% higher than yesterday and 8.74% lower from last week.

It seems as though the EUR/USD rally is fueling net-long interest as it clears the 2019 high (1.1570), while the decline in net-short positions suggests stop-loss orders are being triggered as the exchange rate trades to fresh yearly highs.

It remains to be seen if the crowding behavior in the US Dollar will persist as the FOMC vows to “increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace,” but current market conditions may keep EUR/USD afloat as long as the RSI sits in overbought territory and holds above 70.

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EUR/USD RATE DAILY CHART

Source: Trading View

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