• FX options shows a shift in EUR/USD sentiment over recent sessions

• The risk premium for EUR puts over calls has fallen to its lowest since mid September according to risk reversals

• Benchmark 1-month 25 delta risk reversals have halved to 0.45 since last week, after testing long term highs at 1.7 in early Oct

• This comes as more downside positions are pared amid a noted pick up in demand for topside strikes

• Implied volatility spiked from long term lows to its highest since March in late Sept-early Oct, but has peaked for now

• 1-month expiry covers the Oct. 28 Fed, Nov 6 NFP and US mid term election results, which may limit setbacks

• Large strikes in the low 1.12's help to support/contain EUR/USD into Friday's 10-am New York cut expiry
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)