- Euro nosedived 300 pips on Thursday after ECB delivered a dovish taper.
- Risk reversals hit lowest since May 31, signaling a rising demand for EUR puts.
The EUR/USD fell from 1.1852 to 1.1562 on Thursday and extended losses to 1.1555 in Asian session today as ECB's Draghi announced a QE taper but put off its next major decision (interest rate hike) until well into 2019.
The sell-off in the EUR / USD spot has pushed up demand for EUR puts (bearish bets). The one-month 25 delta risk reversals (EUR1MRR) fell to -0.825 - the lowest level since May 31. The gauge stood at -0.70 a day ago, and at -0.225 on June 7.
The drop to a two-week low of -0.825 represents rising implied volatility premium (rising demand) for EUR puts. Clearly, investors fear the single currency could extend the drop further and hence are seeking downside protection.
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.