The recent USD rout looks to be over for now nL2N2F108E, with profit-taking leading to a minor recovery against most G10 pairs into month's end, but dealers haven't lost sight of the 1.20 target in EUR/USD.
Demand was good for options that would benefit from EUR/USD gains toward 1.20 over the last couple of weeks nL2N2EY08J, helping to drive up their cost.
Subsequent setbacks reflect some profit-taking and expected EUR/USD consolidation, but they remain above recent lows and are expected to attract renewed demand on dips, in a sign that the uptrend remains intact.
Benchmark one-month implied volatility, which gauges future volatility and determines an option's premium, retreated to 7.4 from 8.3 on Tuesday, but that's still more than 1.0 vol above mid-July setback lows -- and it typically gains in August nL2N2EZ0CV.
One-month 25 delta risk reversals showed the premium for EUR calls over puts (the right to buy EUR versus sell it) posting two-year highs at 0.6 this week, with minimal setbacks there since.
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