EUR/USD options shed bearish bias, long-term outlook bullish

EUR/USD one-month expiry risk reversals shed bearish bias.
One-year expiry risk reversals show bullish bias has strengthened.

Omkar Godbole FXStreet Contributor

The EUR/USD risk reversals (implied vol premium for EUR calls vs EUR puts) rose to neutral (zero) yesterday vs. EUR 0.275 on Friday and 0.975 EUR puts on Feb. 12.

The decline in the implied volatility premium for the one-month expiry EUR puts (sell EUR or bearish bets on the EUR) adds credence to EUR's recovery from 1.2154 (Mar. 1 low) to 1.2350 and indicates the investors do not see the EUR revisiting its recent lows in the short-term.

Further, the one-year expiry risk reversals are currently being paid at 0.50 EUR calls (buy EUR or bullish bets on the EUR) vs. 0.35 EUR calls on Mar. 1 and just shy of the multi-year high achieved in late January at 0.7. The rise in the implied volatility premium for EUR calls (bullish bets) indicates the long-term bullish bias has strengthened. "It seems many are holding positions that allow them to buy EUR/USD at levels above 1.30 in a 9-month to 1-year horizon, relying on the pair being above those levels to profit", according to Reuters report.

As for today, the European data docket is thin, hence the pair is at the mercy of the market's appetite for the US dollar.

EUR/USD Technical Levels

As of writing, the spot is trading at 1.2350. A break above 1.2365 (previous day's high) would allow for a stronger gain towards 1.2402 (61.8% Fib R of 1.2556-1.2154) and 1.2435 (Feb. 19 high). On the downside, a close below 1.2292 (10-day MA) could yield a re-test of 1.2248 (50-day MA) and 1.22 (psychological level).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	Expanding
1H	Bearish	Overbought	Shrinking
4H	Bearish	Neutral	Expanding
1D	Bearish	Neutral	Low
1W	Bearish	Neutral	High
Updated Mar 6, 03:15 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD keeps range near 0.6950 after Australian trade data

AUD/USD consolidates near a two-month low, trading around mid-0.6900s in the Asian session on Thursday amid a bullish US Dollar. The US PCE data tempered October Fed hike bets, though oil-driven inflation fears remain supportive of elevated US bond yields. Meanwhile, Australia's trade surplus shrank sharply in August to AUD495M, having limited impact on the Aussie Dollar and the pair.

USD/JPY sits at weekly top above 158.00 as bullish USD counters intervention risks

USD/JPY is sitting at the top end of its weekly range above 158.00 in the Asian session on Thursday. Despite the softer US PCE data, oil-driven inflation risks keep US bond yields elevated near multi-year highs. Moreover, the US-Iran standoff benefits the safe-haven US Dollar and supports the pair. Broad US Dollar strength counters hawkish BoJ expectations and Japanese intervention risks.

Gold alternates gains with losses below $4,200

Gold trades without a clear direction on Thursday, always below the key $4,200 mark per troy ounce. The yellow metal’s vacillating price action comes amid the marked advance in the US Dollar coupled with steady effervescence in the Middle East conflict.

Crypto Today: Bitcoin, Ethereum, XRP struggle to regain momentum amid returning ETF outflows

Bitcoin trades broadly between support at $82,500 and resistance at $85,000. Ethereum similarly remains under pressure, trading below $2,700 while the $2,600 level provides immediate support. At the same time, Ripple has slipped below the pivotal $1.50 level.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Fed. Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Federal Reserve (Fed). Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario. Yet beneath that dramatic repricing, the US economy is sending a considerably less dovish message.