EUR/USD: options markets warn of a potential corrective drop

Pablo Piovano FXStreet

Monday’s preliminary data for the 6EU7 contract expiring on August 4^th by CME Group noted OTM (‘out of the money’) Puts dropped by just 7 contracts vs. an increment of 491 contracts in OTM Calls, mainly in the 1.1600 and 1.1900 strike prices (+217 contracts and +133 contracts, respectively).

Activity in OTM Calls such as this one signals that traders stay mainly focused on the short trade, although they seek ‘protection’ if price action turns against them.

Activity in ITM (‘in the money’) Calls and Puts stayed non-relevant instead, while the Put/Call ratio is at 0.99, showing indecision still prevails among traders.

A leg lower in the offing?

Although calls for an imminent leg lower may seem premature, recent data allow us to infer that the case for a potential correction lower in EUR/USD might be building up. Recent unsuccessful attempts to test/break above the critical resistance area at 1.1440/50 reinforces this view, as EUR-longs could start to unwind if spot stays unable to advance further north of that key area in the next sessions.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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