EUR/USD - Its ECB week, open positions in Calls spike on CME

EUR/USD clocked a high of 1.1980 on Friday before deflating to 1.1861 levels. The brief dip in the USD following the release of weak US wage growth and NFP numbers was quickly undone. The spot traded in the sideways manner around 1.1880 levels in the Asian session. 

ECB - Will Draghi jawbone EUR?

The European Central Bank {ECB] is widely expected to keep the key policy tools unchanged. The main focus is likely to be on how concerned is President Draghi about the pace of EUR appreciation. It is widely believed that Draghi would cite strong Euro as a reason for the downward revision of the inflation forecasts. 

However, that may not be enough to weaken the EUR significantly. Economists believe the scope for dovish talk is limited, given the strong economic growth.

According to a majority of economists in the Reuters poll, the European Central Bank is likely to announce a reduction of its monthly asset purchases in October and shut it down by end-2018. 

Open positions in Call options spike

• The open positions in the Call options jumped by 2740 contracts on Friday and the open positions in the Put options rose by 1884 contracts. 
• Additions were seen in 1.2250 Call, 1.1950 Call and 1.22 Call. Meanwhile, 1.16 Put saw biggest additions in the open interest [OI]
• The spike in Call options OI indicates the investors fear Draghi may not jawbone or will not be able to kill the EUR rally, which seems logical as markets are still very bearish on the US dollar. 

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes - 

“From a technical point of view, the decline has barely affected the dominant bullish trend, as the price managed to bounce earlier on the week from its 20 DMA, the immediate support at 1.1860. Technical indicators in the daily chart have retreated within positive territory, whilst the price is far above a long-term ascendant trend line, around 1.1700/20 for this Monday. A daily close below this last should signal an interim top has been reached. Shorter term, and according to the 4 hours chart, the risk turned to the downside, with the price extending below a bearish 20 SMA, and the RSI indicator heading south around 41, as the Momentum hovers within negative territory. Below 1.1860, the pair has its next strong support in the 1.1780/90 region, a probable bearish target in the case the pair is unable to regain the 1.1900 level.”