Options activity: Signs of reversal in EUR, more gains likely in JPY

The preliminary options activity data for July 24 published by the CME shows the investors are increasingly worried about a potential pull back in the EUR/USD pair and see the Japanese Yen scaling fresh multi-week highs against the US dollar.

JPY/USD JPUQ7 Open Interest Change: Current (Jul 24 - Prelim) vs. Jul 21

Little or no activity in the Put options coupled with a big jump in the open interest positions in near-the-money puts and OTM puts indicates that the investors expect the Yen to keep moving higher. The OI positions in 0.00905 call improved by 490 contracts. Healthy additions were also seen in 0.00910 call and 0.00920 call.

Ignore the Doji candle on USD/JPY

Going by the options activity, investors are likely to ignore the Monday’s Doji candle (indecision) on the USD/JPY daily chart and hit the market with fresh offers. The overnight technical recovery was short lived and the spot has fallen back below 111.00. Dollar-Yen may revisit Monday’s low of 110.62 and may breach the same in favor of 110.15 (76.4% Fib R of 108.80-114.49).

EUR/USD: Pull back to gather steam?

EUR/USD fell to a low of 1.1626 on Monday before catching a bid wave in Asia. The spot rose to 1.1669 earlier today and currently trades around 1.1652 levels.

EUR/USD EUUQ7 Open Interest Change: Current (Jul 24 - Prelim) vs Jul 21

A drop in the ITM Calls OI coupled with a big jump in the OI positions in the OTM puts - 1.1650, 1.6 strike - suggests the investors are preparing for a pullback in the EUR/USD pair. The OTM calls also witnessed an improvement in the OI, although the total OI jump in the put options is almost double the additions seen in the call options.

Hence, it can be concluded that the investors expect a turnaround in the EUR/USD pair. The spot may revisit 1.1550-1.15 levels over the next few days.