EUR/USD is looking to re-enter pennant, fear gauge drops

• EUR/USD's successful reentry in a pennant pattern would abort the immediate bearish view.
• The pair's recovery from the Monday's low of 1.1530 is accompanied by a drop in the fear gauge (ATM volatility)

The EUR/USD rose above 1.16 in Asia and is now challenging the resistance (former support) of the lower end of the pennant, currently located at 1.1622.

A daily close well above that level would abort the bearish view put for by the pennant breakdown witnessed last Thursday.

The uptick seen in during the Asian hours could be associated with the broad-based USD selling, likely triggered by a corrective rally in the Chinese yuan (CN).

Looking ahead, the pair could find acceptance above 1.1622 if the CNY continues to gain ground. Further, the fear gauge or the one-month (ATM) options market volatility (EUR1MO) has dropped to 6.2 from the recent high of 6.7 reached on August 7, adding credence to EUR's recovery from the recent low of 1.1530.

EUR/USD Technical Levels

At press time, the currency pair is trading at 1.1620.

Resistance: 1.1622 (lower end of the pennant pattern), 1.1669 (50-day moving average), 1.17 (psychological level).

Support: 1.1594 (session low), 1.1530 (August 6 low), 1.15 (psychological support).

EUR1MO