EUR/USD: Bid above 50-day MA, risk reversals hit 3-month highs on fading demand for EUR puts
|- EUR/USD is looking north, having found acceptance above the key 50-day moving average (MA) line in the Asian session.
- Risk reversals have hit three-month highs - a sign of falling demand for puts (bearish bets).
EUR/USD may clock three-week highs above 1.1324 in the next few hours as investors are unwinding bearish bets on the common currency.
The one-month 25 delta risk reversals (EUR1MRR) are currently trading at -0.125. Indeed, the negative number indicates the demand or the implied volatility premium for the EUR put options (bearish bets) is higher than that for calls (bullish bets).
The gauge, however, is currently trading at the highest level since Jan. 10. Further, it has witnessed a near 90-degree rise from lows below -0.60 over the last two weeks.
Put simply, the demand or the implied volatility premium for the EUR put options (bearish bets) is currently the weakest in three months and has dropped sharply over the last 2.5 weeks.
The data goes well with the fact that the shared currency has found acceptance above the crucial 50-day moving average (MA) line. The common currency, therefore, may extend gains toward the 100-day MA, currently at 1.1345, in the European session.
The bullish case looks stronger if we take into account the improved risk appetite in the markets. The major Asian stocks are currently flashing green with Japan's Nikkei trading at the highest level since Dec. 4. The Shanghai Composite has also gained more than 1 percent.
The European stocks may follow suit, more so, as the US has reportedly softened its stance on China's subsidies in a bid to reach a trade deal next month.
The upside in the shared currency, however, may not materialize if the European banking stocks extend Friday's decline, denting the risk-on sentiment. Further, the dovish comments by ECB's Villeroy could keep the gains in the EUR under check.
The spot is currently trading at 1.1312, having found bids at the 50-day MA support of 1.13 in Asia.
Risk reversals
Technical Levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.