EUR/USD: Put premium continues to slide ahead of the ECB meeting

  • EUR/USD risk reversals continue to rise on falling put demand.
  • The European Central Bank (ECB) is expected to keep rates unchanged.
  • The EUR could rise sharply if Draghi signals at least one rate increase in 2019 is still on the table.

Risk reversals on EUR/USD, a gauge of calls to puts on the common currency, has jumped to six-month highs, indicating investors are trimming bearish bets to position for a rally in the EUR.

The one-month 25 delta risk reversals (EUR1MRR) are currently trading at -0.35 in favor puts - a level last seen on June 7. Notably, the gauge stood at -1.10 on Oct. 29, meaning the implied volatility premium or the demand for put options has dropped sharply over the last five weeks.

More importantly, put demand has hit six-month lows ahead of the ECB rate decision. It appears as though investors are expecting Draghi to say that at least one rate increase in 2019 is still on the table.

That would indeed push the US-German yield differential to fresh multi-month lows, leading to a broad-based rally in the EUR.

However, both the risk reversals and the common currency could take a beating if Draghi sounds dovish, forcing markets to scale back expectations of 2019 liftoff.


EUR/USD Technical Levels


    Today Last Price: 1.1367
    Today Daily change: -4.0 pips
    Today Daily change %: -0.0352%
    Today Daily Open: 1.1371
    Previous Daily SMA20: 1.1364
    Previous Daily SMA50: 1.1407
    Previous Daily SMA100: 1.1504
    Previous Daily SMA200: 1.1728
    Previous Daily High: 1.1388
    Previous Daily Low: 1.1314
    Previous Weekly High: 1.1424
    Previous Weekly Low: 1.1311
    Previous Monthly High: 1.15
    Previous Monthly Low: 1.1216
    Previous Daily Fibonacci 38.2%: 1.136
    Previous Daily Fibonacci 61.8%: 1.1342
    Previous Daily Pivot Point S1: 1.1328
    Previous Daily Pivot Point S2: 1.1285
    Previous Daily Pivot Point S3: 1.1255
    Previous Daily Pivot Point R1: 1.1401
    Previous Daily Pivot Point R2: 1.1431
    Previous Daily Pivot Point R3: 1.1474


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.