SELL EURUSD: TECHNICAL ANALYSIS - 1.09 CLOSE, MA, STANDEV, IV>HV
EUR$ Technical analysis - highly bearish:
Key level close:
1. On the daily and weekly we closed below the strongest pivot point of recent times below 1.10 - this is very bearish as historically this is the strongest level (lower than post brexit).
MA:
1. We trade below the 2wk and 4wk MA - this is a bearish indication + we have been below the 3m MA since brexit.
IV/ HV:
1. Realised Vols have also unsurprisingly come off, this would but bullish but brexit has distorted the longer dated HV and they are lagging, plus Implied vols are steepening higher than HV - with 1wk, 2wk and 1m Implied vols trade at 9.55%, 8.87%, 7.96% vs HV 1wk 2wk 1m at 6.7%, 7.09%, 7.24% - so IV is greater than HV across the front end which is bearish.
Deviation Channels/ Support levels:
1. We Trade close to the bottom of the 6m deviation channel at 1.0900 but this is due to brexit so shouldnt be considered bullish but we could see resistance here. Looking at the 3m SD channel, this is more appropriate and shows us trading just below the average 3m price - hence there is definitely more room for downside and we have just crossed the middle regression line implying we are entering some downside deviation now, with the -2SD resistance level at 1.085 which is in line with the price support level at 1.083.
Risk-Reversals
1. 25 delta Risk reversals trade marginally bearish for EUR$, with current at -0.25, 1wks at -0.15 and 2wks at -0.32 and 1m at -0.72 - this suggest the EUR$ has a slight downside bias but is potentially searching for direction in lack of ECB directive rhetoric coming out on Thursday. I also think EUR$ has taken a bit of a back space in the vol space as investors search for better alpha (JPY/ GBP pairs) given EUR$ low volatility at the moment due to lacking CB bias vs other pairs.
- Though 3m risk reversals trade with a clearer downside bias at -1.1 which shows the market expects EUR$ to trade lower in the 3m term, even if this is only a slight bias - likely a result of September ECB easing expectations nonetheless.
*Check the attached posts for indepth fundamentals*
Key level close:
1. On the daily and weekly we closed below the strongest pivot point of recent times below 1.10 - this is very bearish as historically this is the strongest level (lower than post brexit).
MA:
1. We trade below the 2wk and 4wk MA - this is a bearish indication + we have been below the 3m MA since brexit.
IV/ HV:
1. Realised Vols have also unsurprisingly come off, this would but bullish but brexit has distorted the longer dated HV and they are lagging, plus Implied vols are steepening higher than HV - with 1wk, 2wk and 1m Implied vols trade at 9.55%, 8.87%, 7.96% vs HV 1wk 2wk 1m at 6.7%, 7.09%, 7.24% - so IV is greater than HV across the front end which is bearish.
Deviation Channels/ Support levels:
1. We Trade close to the bottom of the 6m deviation channel at 1.0900 but this is due to brexit so shouldnt be considered bullish but we could see resistance here. Looking at the 3m SD channel, this is more appropriate and shows us trading just below the average 3m price - hence there is definitely more room for downside and we have just crossed the middle regression line implying we are entering some downside deviation now, with the -2SD resistance level at 1.085 which is in line with the price support level at 1.083.
Risk-Reversals
1. 25 delta Risk reversals trade marginally bearish for EUR$, with current at -0.25, 1wks at -0.15 and 2wks at -0.32 and 1m at -0.72 - this suggest the EUR$ has a slight downside bias but is potentially searching for direction in lack of ECB directive rhetoric coming out on Thursday. I also think EUR$ has taken a bit of a back space in the vol space as investors search for better alpha (JPY/ GBP pairs) given EUR$ low volatility at the moment due to lacking CB bias vs other pairs.
- Though 3m risk reversals trade with a clearer downside bias at -1.1 which shows the market expects EUR$ to trade lower in the 3m term, even if this is only a slight bias - likely a result of September ECB easing expectations nonetheless.
*Check the attached posts for indepth fundamentals*
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