Mizuho argues that there is a risk that EUR / USD long positions will be unwound if the pair hits the 1.20 level.
Today’s high for the pair hit 1.1997 and there is just a general expectation that we will see the 1.2000 level hit at some point in trading today.
Price action over the past few hours has hovered just below the number level, which only adds to the nerves surrounding the current situation.
Mizuho maintains that speculators have added to net long positions in the euro and “it’s hard to see them doing nothing when the positioning is so one-sided.” Adding that the withdrawal could be amplified given this biased positioning.
Keep in mind that there are also barriers between 1.20 and 1.22 which can also help limit any further upside potential in the pair at this time; or at least, it can cause buyers to take profit in the coming sessions.
That said, the pair remains supported by broader dollar weakness in general and the greenback’s technical picture remains rather bleak for now.
The Bloomberg Dollar Index highlights the pain the dollar felt when it broke the August 14 low in trading since last Friday: