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May 22 - 09:48 AM

EUR/USD - FX Options Wrap-EUR/USD Clues; Value Trades; GBP Bears

By Richard Pace  —  May 21 - 10:15 AM

EUR/USD finally took out barriers at 1.1000, but profit takes and fresh shorts leaning against 200-dma (1.1015), as well as more alleged barrier defence, proved too much for bulls.
Options barely reacted, despite alleged short gamma, although that's more likely above the 200-dma.
Implied volatility heavy and 1-month risk reversals unable to register a topside premium nL1N2D30BH.
AUD/USD 1-month implied volatility set to lose its crisis king status to GBP/USD, but a 2.0 discount to 1-month AUD/USD realised vol screams value, so dealers must be expecting actual volatility to wane nL1N2D30SE.
USD/JPY 1-month vol nearing value levels too - its the lowest of the major USD pairings at just 5.6 vols today - only 1.0 away from it's pre crisis low nL1N2D30HW.
GBP/USD vols off slightly today - 1-month 10.5-10.3, but a solid premium to EUR and JPY highlights GBP's greater actual volatility risk.
Risk reversals show the GBP put over call premium is still high at 1.95 vols, meaning GBP/USD downside deemed vulnerable - not helped by negative UK rate talk and Brexit risk nL1N2D30DG

1-month implied volatility Click here

1-month USDJPY vol Click here

EURUSD risk reversals Click here

Refinitiv IFR Research/Market Commentary


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