EUR/USD: More pain ahead as risk reversals slide
- EUR/USD risk reversals hit a one-month low, indicating more pain ahead for the common currency.
- GBP/USD will likely rally, lifting the EUR/USD higher, if the UK moves toward a second Brexit referendum.
The EUR/USD pair could be in for a deeper drop toward 1.13 as the risk reversals have hit one-month lows.
As of writing, the pair is trading at 1.1385, having clocked a two-week low of 1.1377 yesterday. Meanwhile, one-month 25 delta risk reversals, a gauge of calls to puts on the common currency, are currently trading at -0.45 in favor of put options (bearish bets); the lowest level since Dec. 17. The data indicate that investors are adding bets to position for an extended drop in the EUR.
A similar message is being echoed by two-week lows seen in three-month, six-month and 12-month risk reversals. The Euro, therefore, risks extending the ongoing sell-off from the recent high of 1.1570.
The EUR, however, will likely find bids, if the GBP starts cheering the idea of a second Brexit referendum. Oddschecker currently puts the probability of a second referendum at 61.5 percent. More importantly, that probability would rise further, if the UK parliament remains divided, forcing PM May to announce a second referendum in order to avoid hard Brexit.
EUR/USD Technical Levels
Today Last Price: 1.1384
Today Daily change: -9.0 pips
Today Daily change %: -0.0790%
Today Daily Open: 1.1393
Previous Daily SMA20: 1.1433
Previous Daily SMA50: 1.1384
Previous Daily SMA100: 1.1468
Previous Daily SMA200: 1.1614
Previous Daily High: 1.1425
Previous Daily Low: 1.1378
Previous Weekly High: 1.1571
Previous Weekly Low: 1.1396
Previous Monthly High: 1.1486
Previous Monthly Low: 1.1269
Previous Daily Fibonacci 38.2%: 1.1396
Previous Daily Fibonacci 61.8%: 1.1407
Previous Daily Pivot Point S1: 1.1372
Previous Daily Pivot Point S2: 1.1351
Previous Daily Pivot Point S3: 1.1324
Previous Daily Pivot Point R1: 1.1419
Previous Daily Pivot Point R2: 1.1446
Previous Daily Pivot Point R3: 1.1467