- EUR/USD one-month expiry risk reversals shed bearish bias.
- One-year expiry risk reversals show bullish bias has strengthened.
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).
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.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.