EUR/USD: Put demand rises despite Friday’s bull hammer reversal

• The EUR created a bull hammer candle on Friday, so the focus is on today’s NY close.
• Puts gained in value on Friday, despite the bullish candlestick pattern.

Currently, the EUR/USD is flat-lined around 1.1685, having defended the 20-day MA on Friday.

The common currency bulls may be feeling emboldened as the currency pair charted a bullish hammer candle on Friday along the 20-day moving average (MA) support.

However, techies would call a short-term bullish hammer reversal only if the spot closes today above 1.1687 (Friday’s high). On the other hand, a break below 1.1613 (Friday’s low) would shift risk in favor of a drop to 1.1508 (recent low).

EUR/USD puts gain value

Friday’s bullish hammer candle failed to weaken demand for the put options (bearish bets). For instance, the one month 25 delta risk reversals fell to -0.90 on Friday, indicating a rising demand or implied volatility premium for the EUR puts.

Focus on US retail sales

A bullish close (above 1.1687) could remain elusive if US retail sales, due for release today at 12:30 GMT, tick higher as opposed to an expected slowdown to 0.6 percent month-on-month from the previous month’s print of 0.8 percent. On the other hand, a weaker-than-expected figure could yield a stronger follow-through to Friday’s bullish hammer.

EUR/USD Technical Levels

Resistance: 1.1722 (23.6% Fib R of April 17 high – June 21 low), 1.1771 (upper Bollinger Band: standard deviation of +2,-2 on 20-day moving average), 1.1852 (June 14 high).

Support: 1.1658 (20-day moving average), 1.1613 (previous day’s low), 1.1508 (June 21 low).