Call Options Still Preferable for EURUSD As Bulls Gain Strength
Aug, 12th 05:33
China’s Central Bank devaluated the Yuan by 1.9%, the most on record, triggering a sell-off in commodity currencies that last all through the day. The dollar was benefited by the move, although European traders rushed to sell it and American ones to buy it back.
Greece reached a deal with its creditors that needs now to approved by the Greek Parliament and the EU finance ministers afterwards, probably the main reason of the intraday EUR’s rally, as local data was soft: German Wholesale prices fell by 0.5% compared to a year before, whilst the ZEW survey showed that local economic sentiment contracted, down to 25 in August, from previous 29.7. In the EU however, the economic sentiment, according to the survey surged to 47.6 against expectations of 43.9.
US data was also tepid, as worker productivity output increased at a 1.3% annualized rate from April through June, following a 1.1% decline in the first quarter of the year.
The EUR/USD pair surged to a 2-week high of 1.1087 after being as low as 1.0960, closing the day a handful of pips above its daily opening, with investors rushing to profit on rallies either side of the board.
The pair broke briefly above the daily descendant trend line coming from March high of 1.1435, but ended the day below it, which should discourage longer term buyers. The short term technical picture is still positive, as the 1 hour chart shows that the price holds above its 20 SMA and the technical indicators above their mid-lines, lacking however, directional strength. In the 4 hours chart the technical indicators have turned sharply lower after approaching overbought territory, although the price remains above a bullish 20 SMA.
Renewed selling pressure below 1.1000 should lead to a bearish continuation this Wednesday, while gains beyond 1.1045 may see the pair approaching the 1.1120 region.