Where we are: EUR/USD is currently trading at 1.1719, up 0.28% on the session after a low of 1.1673. Overnight momentum pushed Fiber higher on a weaker dollar, testing intraday highs of 1.1721. The Euro is attempting to reclaim lost ground after trading at two-week lows earlier in the week, still holding below the prior NY close near 1.1750.
What’s driving it: Dollar weakness is the primary driver, evidenced by the DXY falling to 98.36, down 0.31% as US yields compress. A partial unwind of geopolitical risk premia, tied to the US-Iran talks, is adding fuel to the fire. Speculator positioning in EUR is modestly long, at the 10th percentile, which means the squeeze potential on any sustained upside surprise is substantial.
- Guardian Business: “California’s jet fuel supply drops to three-year low as Middle East turmoil squeezes global oil market,” suggesting a reversal of geopolitical tension releases upside pressure.
- US 2Y yields are down 5.9bp to 3.785%, as the market prices in less hawkish Fed policy.
- EUR net non-commercial positioning is only at the 10th percentile.
NY session focus: Traders will be watching for follow-through on the dollar weakness, aiming for 1.1750 initially, then 1.1800 as the next key level. The US-German 10-year yield spread is currently at +131bp, with room to tighten in favor of the Euro, especially as European politicians like Macron posture toward greater continental military independence. Keep an eye on any headlines related to the US-Iran talks, as well as President Trump’s speech at 17:00 London time, which could introduce volatility. The pain trade here is a resurgence of geopolitical tensions driving a flight to safety and dollar strength, pushing EUR/USD back below 1.1700.