EUR/USD - First attempt at monthly 50-MA failed, risk reversals flat lined

The EUR/USD pair rose to a high of 1.1910 yesterday before falling back below the monthly 50-MA level of 1.1870. The monthly 50-MA was put to test on Wednesday for the first time after August 2014.

Risk reversal flat lined

The one-month 25 delta risk reversal remains flat lined around 0.25 levels despite, which indicates the demand for call options isn’t picking up pace despite the rally in the spot. The divergence could be an advance indicator of bull market exhaustion in the EUR/USD pair. 

Focus on EUR/GBP cross and US ISM non-manufacturing employment index

The hawks at the BOE are likely to retreat today in response to the dismal GDP and an unexpected drop in inflation. Still, the central bank is likely to keep the rate hike talk alive and ensure there is no further rise in imported inflation. BOE action could yield a big move in the EUR/GBP cross and influence the EUR/USD pair. 

Later in the day, a strong US ISM non-manufacturing employment index could boost the treasury yields and weigh over the EUR/USD pair. Meanwhile, dovish BOE [spike in EUR/GBP] and a dismal ISM figure could yield an end of the day close in the EUR/USD above 1.1870 [monthly 50-MA]. 

EUR/USD Technical Levels

The spot traded around 1.1845 in Asia. FXStreet Chief Analyst Valeria Bednarik writes, “the 4 hours chart, the 20 SMA continues leading the way higher, providing a dynamic support now at 1.1800, whilst technical indicators accelerated north, entering overbought territory and at fresh weekly highs. The market may enter in wait-and-see mode on Thursday after the release of services and composite PMIs in the EU and the US and ahead of the US Nonfarm Payroll report, with dips still seen as buying opportunities.”

OctaFx Analyst Team says, “the euro lost some previously gained ground but is still moving above the important level of 1.1800. Its breaking may lead to further declines to 1.1700 and 1.1620. Breaking through the lower boundary of the rising channel may become a signal to sell with potential goals at 1.1620 and 1.1500. The next upside targets are located at 1.1900 and 1.2000.”