However, he believes that further upside potential could follow and a push to 1.3140 is well within reason. Alternatively, a break of 1.2935-50 would call this constructive view into question.
Elsewhere, he notes that implied volatility has picked up from very depressed levels in recent days. It finished last week above its 20 day MA for the first time in almost three months. The 60 day correlation between 3 month implied volatility and the Euro has turned positive in recent days after being inversely correlated since early September. He comments that this correlation was positive in the Jan -Feb period but turned inverse from Late February through to late July and then remained positive until early September.
He writes, “It appears that the Euro’s advance is being met with call buying (either for protection of underlying shorts or as a way to benefit from a Euro advance rather than getting caught up in the vagaries of spot action). The risk-reversals (Euro calls relative to puts equidistant from the forward strike) now show the smallest discount for Euro calls (smallest premium of Euro puts) since the Greek crisis first surfaced in late 2009.”