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Mar 17 - 01:55 PM

EUR/USD - COMMENT-EUR/USD Downside Risks Persist Ahead Of Fed

By Christopher Romano  —  Mar 17 - 10:34 AM

EUR/USD remained mired below the 10-day moving average ahead of the conclusion of the Fed's meeting later on Wednesday, and breaks of key supports still appear likely according to signals generated by options and technicals.

Option investors are growing more wary of EUR/USD downside as risk reversals show vol premiums for euro puts grew over premiums for calls.
Investors have been steadily buying euro puts, some with strikes as low as 1.1600, which bolsters concerns for EUR/USD downside nL1N2LF189.

Technicals continue to highlight downside risks for EUR/USD.
The rally off the March 9 daily low stalled at the 38.2% Fibo of 1.2244-1.1836 and near short-term structural resistance near 1.2000.
EUR/USD continues to hold below the 10-DMA while falling daily and monthly RSIs are not oversold and imply bearish momentum.

Should the Fed fail to ease investors' concerns about rapidly rising U.S. Treasury yields US10YT=RR and lower expectations for hikes to be pulled forward EDH3EDZ2 the dollar is likely to extend its recent rally.

EUR/USD could then break below the 200-DMA, March monthly low and trend line off the May 2011 high, potentially leading EUR/USD longs to exit positions and putting support near 1.1600 in focus.

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Source:
Refinitiv IFR Research/Market Commentary

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