Because of their forward-looking nature and their being a derivative of EUR/USD, FX options can offer clues on the outlook for the FX rate.
Like EUR/USD spot, the options market is positioned for the USD to weaken, and that positioning hasn't changed significantly.
However, recent U.S yield gains and the mild USD recovery has seen a shift in shorter-dated price action.
Additional premium for EUR calls over puts (topside versus downside strikes) has fallen, with sub-one-month expiries turning in favour of EUR puts/USD calls (downside strikes).
That premium is still small, but suggests that some shorter- dated topside options have been pared or there's been a pick-up in shorter-dated-expiry options that would protect against a steeper EUR/USD drop.
However, implied volatility, which gauges future actual volatility and determines premium, has eased quite significantly since Monday.
Benchmark one-month expiry was last trading at 6.3 from 7.1, which is more consistent with range trading and lack of actual volatility in the near term.
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