EUR/USD risk reversals contradict bearish pinbar, still gunning for 1.20?

EUR/USD - bullish sentiment strengthens in the options market.
Bearish pin bar needs a negative follow-through.

Euro's drop from the previous day's high of 1.1975 to 1.1898 cannot be attributed to specific factor(s) but could be considered as a sign of bull market exhaustion. Kathy Lien from BK Asset Management writes, "the technical structure of the pair signals a deeper correction to 1.1850."

However, as per textbook rules, only a negative follow-through (bearish price action) today would add credence to the bearish pin bar candle and open doors for a deeper pullback.

But, the EUR/USD risk reversals gauge suggests the bearish pin bar could be a bear trap.

Risk reversals

The one-month 25 delta risk reversals gauge rose to 0.55 yesterday; the highest level since July 25. The uptick in the gauge indicates increasing demand for the EUR calls. Clearly, the options market sees yesterday's dip as a temporary one.

Still, a move above 1.20 is easier said than done as the memories of ECB jawboning the currency back in September could keep the bulls at bay.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, "technically and for the upcoming sessions, the pair retains the bullish stance despite the modest daily pullback, as in the 4 hours chart, technical indicators have managed to correct extreme overbought conditions, but remain well into positive territory, with the RSI around 62 indicating a limited downward strength. In the same chart, the 20 SMA maintains its bullish slope around 1.1870, reinforcing the view. The 1.1890 region is the immediate support, en route to 1.1860, while only below 1.1820 bulls will lose hope, handing the grip to bears.

Support levels: 1.1890 1.1860 1.1825

Resistance levels: 1.1960 1.2000 1.2045

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	Shrinking
1H	Bearish	Oversold	Expanding
4H	Bearish	Neutral	Low
1D	Bearish	Overbought	High
1W	Bullish	Neutral	Low
Updated Nov 28, 03:00 GMT

Share: Feed news

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.