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The Euro gains ground as solid data drives currency pair

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The Euro gains ground as solid data drives currency pair

The Euro gain ground against the greenback on Monday, as softer US yields gave traders an incentive to move into riskier currencies.  Friday’s weaker than expected US employment report, eroded US yields pushing the yield differential in favor of the Euro.  Managed money increased long futures and options positions according to the latest commitment of traders report.

Yields moved in favor of the European currency on Monday, bouncing toward 15 basis points from the lows made in Thursday near 20 basis points.  A higher yield generally attracts investors as it makes it more difficult to short a currency.

The manufacturing PMIs in the euro gained traction in August, increasing investor confidence.  ECB President Draghi has even referred to them which show the central bank is also secure with the gains seen in the EU.  Yields have reflected sentiment, allowing the Euro to rise against most major currencies.

Hedge funds decreased their upward bets on Euro futures and options according to the latest release of the commitment of traders report.  According to the CFTC, leveraged money decreased long positions by 15K contracts while increasing short positions by 6K contracts.

The EURUSD currency pair is trading between resistance seen near the 10-day moving average at 1.3225, and support near the 50-day moving average near 1.3205.  A close above resistance would likely generate a test of the August highs at 1.35, while a close below the 50-day moving average could lead to a test of the recent lows at 1.31.

Momentum on the currency pair is negative with the MACD (moving average convergence divergence) index printing in negative territory with a negative trajectory. The MACD is printing at its lowest levels since early July.  The RSI (relative strength index) is printing near 46, which is on the lower end of the neutral range.

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