The September Selloff: Why the Euro Can’t Catch a Bid
EUR/USD closed Friday at 1.1378, down another 100 pips, and the euro’s September has gone from bad to worse. The pair has now fallen 2.5 cents from the August high of 1.1712, and each bounce is shallower than the last.
This isn’t just dollar strength
That’s the key point. The dollar is firm, yes — USD/JPY at 157.46, sterling down to 1.3229. But the euro is underperforming even within a strong-dollar tape. EUR/GBP has fallen from 0.8600 to 0.8540 over two weeks, meaning the market prefers sterling even while selling both against the dollar. When traders sell your currency first and ask questions later, the problem is yours, not the dollar’s.
And Europe’s problem is the same one it’s had all year: growth. The eurozone’s manufacturing sector remains in contraction, services momentum is fading, and the ECB’s own staff projections keep drifting lower. The market has quietly stopped pricing any ECB tightening before 2027 — and is beginning to price the opposite.
Positioning: the one silver lining
Speculative short-euro positioning is approaching the crowded zone. That doesn’t stop trends — the trend is plainly down, with 1.1354 (the September 17 low) the next marker, then 1.1325, then 1.1200. But crowded shorts are fuel for violent 200-pip squeezes on any decent headline, and September’s calendar still has plenty of headline potential.
How to trade it
Short rallies, not breakdowns. The pair below 1.1400 has poor risk-reward for fresh shorts given the positioning. Better to sell a bounce toward 1.1450–1.1480 with stops above 1.1520. The trend pays the patient.
Disclaimer: This is market commentary, not investment advice. FX trading carries substantial risk of loss.
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