EUR/USD is down on the day as investors grow concerned global growth could be in jeopardy amid the spread of the Delta variant, but a big move appears unlikely, while technical signals suggest bulls still have the advantage.
Options markets indicate investors expect EUR/USD movements to be limited for now.
Risk reversals EUR1MRR=FN show that vol premiums from 1-week out to 3-months are near neutral.
Large options with 1.1840/55 strikes that expire this week nL1N2PA0CR reinforce the indications risk reversals are giving.
While EUR/USD moves are likely to be muted, technicals bristle with upside potential.
Gains from the rally off the July 21 daily low are currently being consolidated, while EUR/USD trades above structural support near 1.1840.
Consolidation is a healthy development for trends, and once complete, EUR/USD should resume its recent rally.
The 10-day moving average crossed above the 21-DMA Tuesday to generate an added bull signal.
However, U.S. July non-manufacturing ISM, and employment report risks, loom.
Should the data indicate economic and job growth are slowing, U.S. interest rates, and the dollar, could fall further as the probability of the Fed becoming less accommodative will diminish.
EUR/USD's rally is then likely to resume, but gains are likely to be a grind.
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