CitiFx is bullish on EUR/USD, expects 1.3853

Citibank Forex Strategists maintain that technically the uptrend in EURUSD is still in place and the target is 1.3853. Further gains following the recent consolidation are expected according to CitiFx strategists. EURUSD flows continue to suggest that the current phase of risk reduction may not be over. Leveraged accounts appeared to be profit taking as spot bounced off the mid 1.33 level around two weeks ago, but their flows have become roughly flat as spot continued to rally in the recent trading sessions. Also, real money accounts that had been heavy sellers at the end of July have not been significant buyers of EURUSD over the past two weeks despite the strong spot rally, perhaps indicating their lack of confidence in re-entering their prior EURUSD longs for fear that the risk reduction regime will carry on.

The uptrend in EURUSD is still in place and a rally towards the highs looks likely in the ST-days/weeks ahead. For a longer horizon, one should monitor how the flows from the investor community (which have been approximately flat in recent weeks) develop in this volatile environment.