- EUR/USD one-month expiry risk reversals shed bearish bias.
- One-year expiry risk reversals show bullish bias has strengthened.
The EUR/USD risk reversals (implied vol premium for EUR calls vs EUR puts) rose to neutral (zero) yesterday vs. EUR 0.275 on Friday and 0.975 EUR puts on Feb. 12.
The decline in the implied volatility premium for the one-month expiry EUR puts (sell EUR or bearish bets on the EUR) adds credence to EUR's recovery from 1.2154 (Mar. 1 low) to 1.2350 and indicates the investors do not see the EUR revisiting its recent lows in the short-term.
Further, the one-year expiry risk reversals are currently being paid at 0.50 EUR calls (buy EUR or bullish bets on the EUR) vs. 0.35 EUR calls on Mar. 1 and just shy of the multi-year high achieved in late January at 0.7. The rise in the implied volatility premium for EUR calls (bullish bets) indicates the long-term bullish bias has strengthened. "It seems many are holding positions that allow them to buy EUR/USD at levels above 1.30 in a 9-month to 1-year horizon, relying on the pair being above those levels to profit", according to Reuters report.
As for today, the European data docket is thin, hence the pair is at the mercy of the market's appetite for the US dollar.
EUR/USD Technical Levels
As of writing, the spot is trading at 1.2350. A break above 1.2365 (previous day's high) would allow for a stronger gain towards 1.2402 (61.8% Fib R of 1.2556-1.2154) and 1.2435 (Feb. 19 high). On the downside, a close below 1.2292 (10-day MA) could yield a re-test of 1.2248 (50-day MA) and 1.22 (psychological level).
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