As the EUR/USD continues to climb without much news, the question on everyone’s mind is whether the euro will finally break out of its 18-month trading range. According to ING’s FX strategist Chris Turner, the currency pair has been mostly contained between 1.05 and 1.11.
Upside Bias in FX Options Market
Turner notes, “The FX options market suggests that the bias is with the upside, at least over the next month. The one-month risk reversal, which measures the price of a EUR/USD call option compared to a put option, is increasingly favoring euro calls. This trend is accompanied by rising implied volatility, indicating active buying of euro call options.”
Despite a light eurozone calendar, Thursday’s PMI releases are anticipated. Additionally, the eurozone’s monthly current account data for June is expected to show a surplus of around €30bn per month, a stark contrast to the deficits seen in 2022. Lower oil prices, driven by a potential Middle East peace deal, are seen as positive for EUR/USD, with 1.1040/1050 as potential intra-day support and 1.1110/1140 as significant medium-term resistance levels to watch for.
Analysis:
The EUR/USD pair is currently in a crucial phase, with the potential to break out of its long-standing trading range. With an upside bias in the FX options market and favorable economic indicators in the eurozone, the euro could see further strength against the US dollar. Traders and investors should closely monitor key support and resistance levels to capitalize on potential opportunities in the forex market.