EUR/USD sees a sharp rise in 1-month 25D Risk Reversal, eyes German IFO
|Monday’s pullback in the EUR/USD pair to 1.1626 was short lived as the offered tone around the USD gathered pace in Asia, pushing the spot above the 1-hour 50-MA of 1.1651.
One-month 25 Delta Risk Reversal spikes
The chart above shows the risk reversal jumped to 3.40 on Monday from Friday’s reading of 0.25. The sharp rise represents increased demand for the EUR/USD call options (bullish sign) ahead of the German IFO due for release at 8:00 GMT.
German IFO: Slight deterioration in the sentiment expected
The Current Assessment index for July is seen coming-in at 123.8 vs. 124.1 in June. The Business Climate index is seen at 114.9 vs. 115.1 in June, while the Expectations index is seen cooling to 106.5 vs. 106.8.
The EUR/USD pair could scale higher to 1.17-1.1713 (Aug 2015 high) if the IFO indices beat estimates. On the other hand, a weaker-than-expected number could yield another pull back, which may be short lived as option traders are positioned (rise in risk reversal) for more gains in the EUR/USD pair.
EUR/USD outlook - Kathy Lien from BK Asset Management
“We believe new lows will be reached tomorrow if IFO surprises to the downside, at which point we'll be looking at 1.1550 for support”
EUR/USD Technicals
The 4-hour RSI is rising again with all major averages - 50-MA, 100-Ma, 200-MA sloping upwards. The 1-hour RSI has moved above 50.00 levels, while the spot has retaken the hourly 200-MA. There are no signs of stress on the daily chart as well, except for the overbought RSI… which could come into play if the German IFO numbers disappoint expectations.
EUR/USD Technical Levels
Resistance: 1.1685 (23.6% Fib R of 2008 high - 2017 low), 1.1713 (Aug 2015 high), 1.1794 (weekly 200-MA)
Support: 1.1620 (5-DMA), 1.1532 (1-hour 200-MA), 1.1463 (4-hour 100-MA)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.