EUR/USD dipped to a low of 1.1998 in Asia as the USD sell-off ran out of steam on North Korea inaction.
Investors had ditched the US dollar on Friday in favor of lower yielding currencies on fears that North Korea may fire another missile over the weekend, thus leading to escalation of tensions in the Korean Peninsula.
The consensus in the market is that the euro is on track for more gains after European Central Bank President [ECB] Mario Draghi made it clear that it is not a question of if but a question of when they would start tapering asset purchases. Kath Lien from BK Asset Management says, " Between the ECB's plans to reduce QE purchases in October, their upgraded GDP forecasts, their limited concerns about the euro and our negative outlook for the U.S. dollar, we expect the EUR/USD to rise into the October meeting taking out 1.2135, an area where EUR/USD found support in 2010 and 2012 before making its way to 1.22."
However, the options market activity suggests the currency pair could revisit sub-1.20 levels. The preliminary data for EUR/USD Oct expiry options shows big jump in the open positions in the Put options.
Source: CME
- Open positions in Puts increased by 4605 contracts, out of which 3804 additions were in out-of-the-money options.
- Meanwhile, the open positions in Calls jumped by 2993 contracts. The ratio of change in open positions in Puts to change in open positions in calls is 1.53. A high ratio at the three-year high indicates the options market may be right this time, i.e. a corrective move below 1.20 is likely.
Attentions today will likely remain with wider risk trends as the domestic macroeconomic docket offers little to spark direction with focus turning to key U.S inflation and detail sales data due Thursday and Friday.
Fed Blackout: This week, there are no public speeches by Fed officials as they are in a communications black out period until the next Fed interest rate statement, which is scheduled for next week.
EUR/USD Technical Outlook
ProAct Forex Target Traders See: We are currently sitting @ 1.2027 in a 5th wave. We are looking to continue to the R6 @ 1.2772. The average daily true range (ATR) for the pair currently is 87 pip.
The daily chart shows that the 20 DMA has gained upward strength below the current level, whilst technical indicators have eased modestly from overbought readings, far from suggesting upward exhaustion. The long term daily ascendant trend line coming from 1.0603, comes around 1.1780, the level to break to talk about an interim top and a possible trend reversal. Shorter term, and according to the 4 hours chart, the risk is towards the upside, as the price settled well above all of its moving averages, with the shortest currently around 1.1975, and technical indicators having stabilized well into positive territory after correcting overbought conditions.
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 trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.