- 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.
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).
Share
