Those looking for short-term EUR/USD gains should note option market warnings - the pricing reflects flagging enthusiasm and risk of a deeper decline.

Risk reversals show which way dealers think EUR/USD is most likely to trade over a given time.
They will charge a premium for options in that direction.
The premium for EUR calls over puts (topside) was increasing over recent weeks, but it's since reversed.

One-week expiry risk reversals fell from 0.5 EUR calls to 0.2 EUR puts (downside).
Two-week expiry is now neutral from 0.5, and one-month 0.2 from 0.55 EUR calls.

Brexit risk is playing a part.
GBP-related risk reversals hold a huge premium for GBP downside options, and EUR wouldn't be unscathed by no deal.

However, longer-term EUR/USD bulls shouldn't be discouraged - investors are still buying options that give them the right to buy EUR/USD over coming months, using leveraged call spreads with minimal or zero cost - looking for eventual gains toward 1.2500 nL1N2IP0OI.

How options are pricing ECB risk nL1N2IQ0IP

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