EUR/USD bearish bets lose value despite prospects of hung parliament in Italy

  • Implied volatility premium of EUR puts continues to drop. 
  • Fears of full-fledged global trade war could keep the EUR well bid. 

The implied volatility premium for EUR puts (bearish EUR bets) continues to drop, suggesting investors do not expect a hung parliament in Italy to have a big impact on the EUR/USD

The EUR/USD one-month 25 delta risk reversals are being paid at 0.10 EUR puts vs. 0.15 EUR puts on Friday and 0.775 EUR puts on Feb 21-Feb.23. Quite clearly, the risk reversals erased a major chunk of put bias (bearish bias) in the run-up to German coalition vote and Italian elections. 

As of writing, the EUR/USD is trading at 1.2327, having clocked a high and low of 1.2365 and 1.2299 earlier today. The common currency ran into offers in early Asia as reports hit the wires that Italy is heading for a hung parliament. Further, it was reported that anti-EU parties have put on a good show in the elections. However, the pair found bids around 1.23, as Merkel secured the fourth term in power after SPD backed coalition deal. 

Ahead in the day, the EUR could take cues from the Italy-German 10-year bond yield spread (higher yield spread could hurt the EUR). However, the downside could be limited as the common currency is backed by current account surplus and thus holds an edge against the USD if trade wars escalate. 

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik says the EUR's move above the 20 SMA has reinforced the bulls. Bednarik writes, "shorter term, and according to the 4 hours chart, the scale is lean toward the upside, as the pair recovered well above its 20 SMA, technical indicators maintain their bullish slopes within positive territory, while the pair ended the day near its daily high. The highs in the 1.2350 region come as the immediate resistance, with steady gains above it backing the case for an extension beyond the 1.2400 figure."

Support levels: 1.2300 1.2265 1.2220

Resistance levels: 1.2350 1.2390 1.2420

15M Bearish Neutral Low
1H Neutral Expanding
4H Bullish Neutral Shrinking
1D Bearish Neutral Shrinking
1W Bearish Neutral High


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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD climbs above 1.1250 as investors eye coronavirus headlines

EUR/USD preserved its recovery momentum early Friday and rose above 1.1250 during the European trading hours. Markets are doubting the Fed's policy tightening prospects as the new coronavirus variant revives concerns over the economic recovery losing steam.


GBP/USD rebounds toward mid-1.3300s on broad dollar weakness

GBP/USD reversed its direction after dipping below 1.3300 earlier in the day and started to push higher toward 1.3350. The greenback is facing heavy selling pressure amid the sharp decline witnessed in the 10-year US Treasury bond yield.


Gold clings to strong gains above $1,800 as US T-bond yields plunge Premium

Gold staged a decisive rebound on Friday and reclaimed $1,800. The intense flight to safety is causing US Treasury bond yields to fall sharply and fueling XAU/USD's rally. Investors await news on vaccines' effectiveness against the new COVID variant.

Gold News

Cardano could tank to $1 if ADA fails to defend crucial support

Cardano price is currently hovering below a freshly shattered 6-hour demand zone, ranging from $1.68 to $1.79. This resulting crash could extend to the immediate and critical foothold at $1.40. 

Read more

Black Friday 2021 Discounts!

Do you want to take your trading skills to the next level? Now you have a chance of leaping forward at attractive introductory rates. For Black Friday, FXStreet is offering discounts of up to 50% on its upgraded Premium plans. 

Subscribe now!