EUR/USD: Puts in demand ahead of Draghi's speech

The EUR/USD risk reversals indicate rising demand for EUR puts.
Escalating trade tensions favor further downside in EUR/USD.
Markets look to ECB forum in Portugal for rates clues.

Omkar Godbole FXStreet Contributor

The EUR/USD one-month 25 delta risk reversals fell to -1.05 today - the lowest level since May 30, indicating a rising implied volatility premium (rising demand) for the EUR puts (sell EUR). The risk reversals gauge stood at -0.23 on June 7.

The options market data indicates the investors are likely hedging/seeking downside protection against a deeper sell-off in the EUR/USD pair. As of writing, the spot is trading at 1.1642.

The common currency could revisit post-ECB low of 1.1543 and could possibly break below the recent low of 1.1510 on escalating US-China trade tensions and political uncertainty in Germany. Also, bears may hit the market with fresh offers if the ECB President Mario Draghi reiterates dovish end the central bank's QE program. The central bank chief will deliver introductory speech ECB Forum on central banking today.

EUR/USD Technical Levels

Resistance: 1.1645 (5-day moving average), 1.1687 (20-day moving average), 1.1852 (Thursday's high).

Support: 1.1618 (session low), 1.1543 (post-ECB low), 1.1510 (May 29 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M		Overbought	Shrinking
1H	Bearish	Neutral	Shrinking
4H	Bullish	Neutral	Low
1D	Bearish	Neutral	Expanding
1W	Strongly Bearish	Oversold	Expanding
Updated Jun 19, 03:30 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.

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