• Fresh attacks by both sides show negotiations to end Mid-East conflict are not as close as hoped

• Oil and USD higher but overall gains remain limited as escalation fears are still contained for now

• EUR/USD based 1.1586 before regaining low 1.16's - support May 21 1.1577 low since early April

• That's down from 1.1661 Wed. Bulls need close above 55 and 200-dma's 1.1648 and 1.1682

• EUR 1-billion 1.1595-1.1600 option expiries today, more nearby on Friday - hedging helps contain FX of late

• Benchmark 1-month expiry FX option implied volatility sits just above new lows since Jan at 5.1

• Option risk reversals retain a volatility premium for downside over upside strikes, but its very small

• Related - Morgan Stanley urges investors to fade any dollar recovery
EUR=EBS


EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)