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Aug 10 - 04:55 AM

EUR/USD - COMMENT-EUR/USD Rally Over For Now, According To FX Options

By Richard Pace  —  Aug 10 - 03:15 AM

Price action in FX options is consistent with a consolidation period in EUR/USD, after the rapid gains to two-year highs above 1.1900.

The EUR/USD rally fuelled demand for options and raised their cost, but demand and prices peaked last Thursday as profits were booked, hinting that a top is in place for now nL1N2F80Q3

Option market implied volatility gauges future volatility and is a key parameter in the cost of the underlying option - the benchmark one-month contract peaked at 8.6 last week from 6.1 in mid-July and has dropped back to 7.6 since.
One-year implied volatility is now 7.6 after recent gains from 7.0 to 8.0.

Risk reversals show the implied volatility premium for EUR calls over puts (EUR/USD topside) has retreated to 0.6 from multi-year highs at 0.85, excluding the early March panic pricing.

Consolidation/setback is healthy for the uptrend, which can eventually resume nL1N2F80AA.

Three billion 1.1800 vanilla options expire today, which - can influence price action/add resistance nL1N2FC03WFor more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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