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Feb 21 - 05:55 AM

EUR/USD - REFILE-BUZZ-COMMENT - FX Options Say EUR/USD Is Going Nowhere Fast

By Jeremy Boulton  —  Feb 21 - 04:35 AM

Corrects comment author

Forward looking FX options can offer clues on the FX outlook and recent price action suggests EUR/USD is going nowhere fast.

Implied volatility is the FX options market gauge of actual volatility expectations and, while it picked up from long-term lows in early February, it's since dropped back toward those levels.
Low implied volatility cheapens FX options and might offer value, but it typically reflects expectations of low actual volatility and any sustained directional moves going forward.

Risk reversals have seen their implied volatility premium for EUR puts over calls (EUR/USD downside versus upside strikes) edge lower.
However, while that can show a lack of conviction to bet on deeper EUR/USD declines, its slow descent might also suggests a lack of demand for topside strikes.

Trade flow is another consideration and dealers report low volumes, which is consistent with low FX volatility within familiar ranges.
However, while implied volatility trades above those recent lows, it can show the uncertainty surrounding interest rates and the potential for related data prints and central bank meetings to reignite FX volatility.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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