EUR/USD retreats towards 1.0600 despite upbeat options market signals

EUR/USD renews intraday low near 1.0600 as it pares the biggest daily jump in a fortnight around a six-month high heading into Wednesday’s European session. In doing so, the Euro braces for the US Federal Open Market Committee (FOMC) monetary policy meeting.

Although the cautious mood ahead of the Fed meeting and China-linked fears weigh on the EUR/USD prices, the firmer signals from the options market and the previous day’s US inflation-led optimism challenge the pair sellers.

Also read: EUR/USD floats above 1.0600 ahead of Federal Reserve monetary policy meeting

That said, one-month risk reversal (RR) for the EUR/USD, a gauge of calls to puts, marked the biggest daily jump since December 02 as per the latest options market data on Reuters.

The RR figure of 0.070 remains in favor of the US dollar bear amid firmer expectations of the Fed’s lower rate hikes. It should be noted that the weekly RR figure of 0.025 could also be cited as supporting the pair buyers as it becomes the fourth consecutive positive reading.

However, the fears that inflation is still high and can push the Fed towards more interest rate increases seem to challenge the pair buyers.

Technically, the EUR/USD buyer’s inability to cross a one-month-old ascending trend line, near 1.0650, joins the overbought RSI (14) conditions to challenge the bulls. Also likely to have probed the upside momentum is the late Doji candlestick at the multi-day top. That said, the previous resistance line from December 05, near 1.0455, could restrict the immediate downside of the pair.

Also read: EUR/USD Price Analysis: Doji at multi-day top, overbought RSI probe buyers ahead of FOMC