ING's analysis of the FX options market reveals a lack of conviction among investors about the recent downtrend in EUR/USD, despite the pair's decline. Indicators such as unchanged volatility levels and stable pricing in the 25 delta risk reversal point to a tepid response from EUR bears, suggesting the market is settling into a new holding pattern at marginally lower levels for EUR/USD. This stance is anticipated to persist until the release of the US CPI revisions on Friday.
Volatility and Risk Reversal Stability: The absence of increased volatility and unchanged costs between EUR put and call options indicate a lack of aggressive positioning for a further drop in EUR/USD.
New Holding Pattern: The data suggests that EUR/USD is likely entering a new phase of relative stability at slightly reduced levels, with investors not showing strong conviction towards a bearish outlook.
Awaiting CPI Revisions: The upcoming release of the US CPI revisions is expected to be a key event that could potentially shift market sentiment and break the current holding pattern.
Despite the downward movement in EUR/USD, ING's analysis of options market data suggests that bearish sentiment among EUR traders is not particularly strong, leading to a tentative holding pattern. The market's focus on the upcoming US CPI revisions highlights the potential for significant data releases to influence future currency movements. Investors are advised to monitor these developments closely as they could provide clearer direction for EUR/USD.