EUR/USD possible squeeze to 1.13/1.15 before falling to parity – BNPP

Research Team at BNP Paribas wants to highlight the increasing risk of a significant EUR/USD squeeze toward 1.13 up to 1.15 if (and only if) the critical level of 1.0860 is broken to the upside. 

Key Quotes

“In the short term, we think the price action is bullish and EUR/USD is likely to re-test the critical level of 1.0860. EUR/USD is currently building an inverted head and shoulder bullish reversal pattern with neckline located at 1.0860: This neckline is not broken yet, so for the time being, there is NO technical buy signal given toward 1.13 up to 1.15. Breaking 1.0860 would simultaneously break the 2016 downtrend resistance supporting a reversal to the upper part of the [1.05;1.15] 2y trading range.” 

“Conclusion:

• It is too early to validate an FX squeeze toward 1.13 up to 1.15, but we believe the risk of such an event is increasing significantly.
• Failure to break 1.0860 would likely support a {1.05;1.0860} trading range in coming weeks, making a monthly break of 1.05 in March 2017 unlikely.
• In the event of a squeeze toward 1.15 materialising, we still believe the bear trend would resume once 1.13 (up to 1.15) is reached and still expect EUR/USD to fall to 1.0 and down to 0.95 by 3Q17.”