- Recent price action indicates the EUR could re-test the yearly highs above 1.25.
- Focus on ECB's language on the ECB.
The EUR's move above the double top neckline of 1.2201 on Mar. 1 trapped bears on the wrong side of the market. In the subsequent days, the common currency extended gains and rose to a high of 1.2446 (yesterday) as fears of trade war saw investors ditch the greenback in favor of the currency backed by hefty current account surplus.
As of writing, the EUR/USD pair is holding just above 1.2402 - 61.8 percent Fibonacci retracement of Feb. 16 high - Mar. 1 low.
The one-month 25 delta risk reversals turned positive earlier this week, indicating the implied volatility premium for EUR calls is higher than the implied volatility premium for the EUR puts, i.e. the move from 1.2154 to 1.2446 has revived demand for the bullish bets (calls).
Further, the momentum studies - 5-day moving average (DMA), 10DMA, and 50DMA are on the rise, indicating a bullish setup. So, it appears the EUR is all set to re-test the yearly high of 1.2556 set on Feb. 16.
That said, the ECB language on QE could either accelerate or slow down the EUR's ascent towards 1.2556. Kathy Lien from BK Asset Management says, "the ECB is widely expected to leave monetary policy unchanged and the only question is how quickly they will start talking about unwinding Quantitative Easing and raising interest rates."
The December policy statement had said a review of policy language may be warranted in early 2018. So, if the language remains unchanged, the EUR could depreciate somewhat, however, investors would then start pricing-in a change in April. So, the drop will likely be short-lived.
EUR/USD Technical Levels
A move above 1.2446 (previous day's high) would allow a stronger rise towards 1.2538 (Jan. 25 high) and 1.2556 (Feb. 16 high). On the downside, failure to hold above 1.2385 (support on 1-hour chart) could yield a sell-off to 1.2355 (1-hour 100-MA) and 1.2328 (Mar. 6 low support on 1-hour chart).
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.