EUR/USD: Focus on Turkey and Eurozone banking stocks, Put value at 16-month high

  • For EUR/USD, Turkey's economic plan action, due today, is pivotal.
  • Sell-off in Eurozone banking stocks could hurt the common currency.
  • The EUR put value has hit a 16-month high, indicating investors are likely expecting a deeper drop in the common currency.

The EUR/USD fell below 1.15 on Friday and hit a 13-month low of 1.1368 in Asia.

The sell-off has been widely blamed on speculation the Eurozone banking sector's vulnerability to the crisis in Turkey could force the European Central Bank to adopt a dovish stance.

As of writing, the EUR/USD pair is trading at 1.1382.

Turkey's President Recep Tayyip Erdogan ruled out an IMF bailout on Friday and also opposed central bank rate hikes despite 27 percent week-on-week slide in the currency.

As a result, the Turkish Lira (TRY) hit a new record low above $7.00 in Asia and the TRY put value also rose to lifetime highs. The continued sell-off in Lira also means the European banking stocks are more likely to open on a negative note and drag the EUR lower.

The options market has already prepared for a further sell-off in the EUR/USD. For instance, the EUR/USD one-month 25 delta risk reversals (EUR1MRR) dropped to -1.55 in Asia - the lowest level since April 2017, indicating a rising demand or rising implied volatility premium for the EUR puts.

So, the common currency could drop below the immediate support of the 200-week moving average of 1.1357. The EUR could regain poise if Tukey's economic plan action announcement, due later today, engineers a sharp bullish reversal in Lira.

EUR/USD Technical Levels

Resistance: 1.1412 (Asian session high), 1.1464 (100-week moving average), 1.1510 (May 26 low).

Support: 1.1357 (200-week moving average), 1.13 (psychological support), 1.1285 (May 2017 high).

EUR1MRR

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

 

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 securities. 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 Forex 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.