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    EUR/USD inter-market: Intrinsic points to further selling pressure towards 1.1100 Haresh Menghani

    After being unable to reclaim 1.1300 handle, nearing 50-day SMA, the EUR/USD pair tumbled below 1.1200 level loosing in excess of 100-pips from session peak level of 1.1295 and decisively breaking below 100-day SMA to hit a fresh two week low.Ahead of the FOMC announcement on Wednesday, the pair managed to bounce-off 1.1200 balance area and was accompanied with a minor up-tick in the German and US 10-years Treasury bond yields, pointing towards improvement in risk sentiment. The pair further got a boost after the Fed left its benchmark interest rates unchanged and lowered its forecast for Fed fund rates and 2016 GDP growth. However, dovish Fed statement deteriorated the risk appetite, as depicted by rise in the volatility index (VIX), dragging the German and US treasury yields sharply lower. The sentiment remained weak on Thursday (continuous rise in VIX) after BoJ also left its deposit rate and asset-purchase target unchanged on concerns surrounding 'Brexit', which the central bank indicated could trigger turmoil across global financial markets. On Thursday, the initial leg of fall in the EUR/USD pair was led by recovery in German yields after the final print of the Euro-zone CPI for May indicating persistent deflationary pressure in the region. The selling pressure gained traction after a sudden rise in the Fed Fund futures that forced short-term traders to unwind bearish USD bets. This was accompanied by spurt in VIX, which further boosted the safe-haven appeal of the greenback and dragged the EUR/USD pair sharply lower.Meanwhile, flattening German and US Treasury yields are pointing towards a pause in the recent rush to the perceived safety of government bonds. However, uncertainty surrounding the crucial 'Brexit' referendum on June 23 would continue to weigh on investor sentiment and keep VIX elevated, eventually boosting safe-haven appeal for the greenback.

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