Market Overview

EUR/USD Analysis: Call OI Spikes, Prepping For A Corrective Rally?

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A head and shoulders top was confirmed for the EUR/USD on Oct. 26. Following that, the pair dropped to 1.1574 on Friday only to recover slightly to 1.1658 levels on Monday.

At the present time, the currency pair is trading at 1.1643. So has the EUR/USD pair found a temporary bottom at 1.1574?

The EUR/USD November expiry options data published by the CME indicates potential for a technical (corrective rally).

EUR/USD EUUX7 Open Interest Change: Current (Oct 30 - Prelim) vs Oct 27

Call Summary 
Total ITM OTM
OI Chg OI Chg OI Chg
60,672 1,734 3,736 393 56,936 1,341

 

Put Summary
Total ITM OTM
OI Chg OI Chg OI Chg
58,119 1,086 20,636 -194 37,483 1,280

The open interest/open positions in the call options rose by 1,734 contracts on Monday, while the open positions in the put options improved by 1086 contracts. The in the money (ITM) puts shed 194 contracts, while the ITM calls added 393 contracts

  • The bias is clearly bullish

EUR/USD EUUX7 Open Interest Change: Current (Oct 30 - Prelim) vs Oct 23

Call Summary 
Total ITM OTM
OI Chg OI Chg OI Chg
60,672 12,809 3,736 1,670 56,936 11,139
Put Summary
Total ITM OTM
OI Chg OI Chg OI Chg
58,119 4,292 20,636 1,011 37,483 3,281
  • Over the last one week, the EUR/USD pair has declined close to 200 pips
  • During the same time period, the open interest in the call options jumped by 12,809 contracts. On the other hand, the open interest in put options rose only by 4,292 contracts. The ratio of change in Put OI and Call OI stands at 0.33
  • Clearly, most participants are betting on a bullish reversal

The technical chart also indicates room for a corrective rally before further downside unfolds.

Daily chart

screen_shot_2017-10-31_at_7.14.49_am.png

  • The 100-day MA (blue line) is still sloping upward
  • Furthermore, the 50-MA has bottomed out on the 1-hour
  • The recovery from 1.1574 happened on the back of a bullish RSI divergence on the 1-hour chart

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  • The EUR/USD pair is likely to move above 1.1786 (100-day MA) and re-test 1.1725-1.1735 levels in a day or two
  • Only a move below Friday's low of 1.1574 would signal revival of the sell-off

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: FXStreetEurozone Forex Markets

 

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