EUR/USD breaks range to the downside, Open Interest jumps, next move - 1.10 or 1.12?

EUR/USD fell to 1.1119 on Tuesday; the lowest level since May 30. The currency pair closed at 1.1133. On the daily chart, it indicates a downside break of the recent trading range of 1.1290-1.1135. 

The preliminary data for Tuesday published by CME shows an addition of 5315 contracts to the Euro FX futures. The volume rose slightly to 153,868. The activity in the FX futures suggests traders could be betting on further losses towards 1.10 levels following a downside break of the trading range. 

Focus on broader market sentiment

The Eurozone economic calendar is light. Hence, the focus is on the broader market sentiment, which appears to have soured following the oil-led losses in the US and Asian markets. 

The question is - Will the common currency strengthen on risk-off? Since mid/late 2014, the EUR has been behaving as a carry currency.

However, things might have changed in 2017 as the strong EZ economic growth and the relative political stability saw investors pour more money into the Eurozone stock markets. This year so far, $13 billion has flowed into American exchange-traded funds focused on European equities… that too without any safeguards or hedges. The fund flow stats clearly show the EUR is being treated as growth currency in 2017. 

Thus, the common currency may drop today on oil-led risk-off, contrary to the rally seen during risk aversion over the past two years or so. The EUR/USD could extend the decline to 1.10 unless markets start pricing-in a delay in the Fed rate hike/slow tightening in response to oil sell-off. 

EUR/USD Technical Levels

The currency pair was last seen trading around 1.334 levels. A break below 1.1109 (May 30 low) would open doors for 1.1021 (May 8 high) and 1.10 (zero levels) - 1.0980 (target as per the measured height method). On the higher side, a break above 1.1166 (June 9 high) would open doors for 1.1220 (resistance offered by the rising trend line) and 1.1268 (May 23 high). The 4-hour RSI is yet to hit oversold territory, suggesting potential for further losses.