EUR/USD: Futures OI suggests potential short-term pull back, dip demand likely

Preliminary data from the CME Group shows a 33K drop in the Open Interest (OI) of the EUR/USD June contract. The Open Interest currently stands at 328,152.

It is worth noting that over the one week period (from June 6 to June 13) the OI has dropped from 395,708 to 328,152. The drop in the OI activity goes well with the bearish price-RSI divergence and ‘Hanging Man’ reversal on the daily chart. 

Thus, a potential for a short-term pullback exists - 1.1155 (support offered by the trend line sloping upwards from Apr 17 low and May 11 low) could still be put to test. The drop in the OI explains why the pair is having hard time extending the rally above the 1.12 mark this week.

EUR bull market intact?

The OI in the September futures contract has gone from 60219 on June 7 to 142,438 on June 13. The addition at the long end of the curve (September futures) could be an advance indicator that markets expect the Fed to give a dovish forward guidance on inflation and interest rates, although investors should still wait for a technical break above 1.1285 before initiating fresh longs.  

The OI in September contract could spike ahead of the weekend if the Fed rules out another rate hike in 2017.