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Oct 04 - 07:55 AM

EUR/USD - These FX Options Have Been Signalling EUR/USD Direction

By Richard Pace  —  Oct 04 - 06:00 AM
  • FX volatility is gauged by implied volatility to determine FX option premium

  • Risk reversals gauge which direction is likely to generate most volatility

  • They show implied volatility premium for strikes in that direction vs other

  • EUR/USD benchmark 1-month 25 delta favoured downside strikes until mid Aug

  • Turned to topside for first time since 2022 when EUR/USD reached 1.1201

  • Was unable to sustain topside premium, despite another 1.12+ test in Sept

  • EUR/USD has subsequently fallen back to the lower 1.1000's

  • 1-month risk reversals regain highest downside strike premium since July

  • Implied volatility flags NFP and U.S. election FX volatility warnings

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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