• EUR/USD option risk reversals were sending warning shots to EUR bulls

• Signalled EUR/USD topside fatigue and growing risk of EUR/USD setbacks

• Their topside over downside risk premiums have taken a big hit this week

• Benchmark 1-month expiry 25 delta risk reversals now 0.25 for USD calls

• That's from 0.6 USD puts Friday and 5-yr high 1.35 USD puts early April

• There's also been increased demand for EUR/USD downside strikes, outright

• These are all now demanding an additional volatility risk premium

• They would increase in value should EUR/USD extend its most recent losses

• FX Options wrap - EUR warning, hedging uncertainty, Fed risk
EUR/USD FXO risk reversals

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