EUR/USD defends trendline amid USD rebound, Put OI spikes


  • Euro holds rising trend line support.
  • Open interest (OI) in EUR puts jumps.

Despite the US tax reform optimism and fading political uncertainty in the US, the EUR/USD managed to defend the trendline sloping upwards from the Nov. 7 low and Nov. 11 low. However, the open interest activity in the EUR/USD options indicates the trendline support could turn into a resistance.

The CME data for EUR/USD Dec expiry options shows the OI in Put options increased by 1227 contracts on Friday, while the OI in Calls increased by 627 contracts.

The increased demand for the bearish bets (Puts) indicates the investors fear the trendline support (seen today at 1.1856) could be breached.

Focus on German political news

Kathy Lien from BK Asset Management writes, " Looking ahead, the performance of the euro will still be driven by German political news and the direction of the U.S. dollar as German industrial production and trade balance are the most important pieces of data on the Eurozone calendar.  For the time being, EUR/USD appears supported above 1.1800."

Also, the EUR could take cues from EZ Sentix confidence and PPI numbers due today.  The upside could be capped as the US tax reform optimism could keep USD well bid.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes-

"From a technical point of view, the EUR/USD pair reached a top of 1.1960 this past week, and a floor of 1.1808, having modestly corrected after rallying up pretty much straight since bottoming at 1.0553 early November, which in the daily chart, signals that the risk remains towards the upside, above all taking into account that the pair met buying interest around its 100 DMA and while the 20 DMA advanced below the largest, now about to reach it. Technical indicators in the mentioned chart have corrected overbought conditions, now directionless above their mid-lines, also indicating limited dollar demand. Shorter term, and according to the 4 hours chart, the pair presents a neutral-to-positive stance, holding a handful of pips above a flat 20 SMA, and with technical indicators heading nowhere within positive territory. Gains beyond 1.1960 should favor an extension up to the 1.2000 figure, but gains beyond the level seem quite unlikely, given the latest dollar-positive news."

Support levels: 1.1860 1.1820 1.1785

Resistance levels: 1.1930 1.1960 1.2000                       

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bearish Neutral Low
1H Strongly Bearish Neutral Shrinking
4H Strongly Bearish Neutral Expanding
1D Bearish Neutral Expanding
1W Bullish Neutral Low

                                               

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