- The demand for EUR put continues to rise, risk reversals indicate.
- Investors expect a deeper drop in the common currency.
The EUR/USD one month 25 delta risk reversals (EUR1MRR) dropped to -0.8 - the lowest level since Feb. 22 highlighting the increased demand for the EUR puts (bearish bets).
The risk reversals stood at -0.5 on May 14 and at 0.0 on April 17. The increase in the implied volatility premium for the EUR puts as represented by the decline in the risk reversals from neutral levels (0.0) to -0.80 in the last one month suggests the investors are preparing for a deeper drop in the EUR/USD.
The pair hit a five-month low of 1.1763 yesterday and was last seen trading at 1.1828. The decline in the risk reversals (rise in demand for the EUR puts) indicates the corrective rally will likely be short-lived.
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