• EUR/USD within 1.15-1.17 range since July. The 200dma 1.1634 caps recovery to 21 Aug high since May at 1.1711

• 100-dma (now 1.1559) underpins since mid August. Hedging of huge 1.1550-1.1650 options add congestion of late

• Rising energy and inflation concerns help underpin USD as markets await Friday's US CPI - key to next weeks Fed policy decision

• FX option implied volatility is high for Friday's CPI and next weeks Fed - recognising that the events could generate volatility

• However, benchmark 1-month expiry vol just above long term lows as continued range trading and low realised vol caps demand

• Risk reversal options show an almost neutral directional premium - consistent with the lack of EUR/USD direction

• That said - broader option prices reflect mild FX unease and risk reversals do show a very small lean toward EUR/USD downside

• Related - FX options wrap - Oil spike sharpens Fed bets as CPI looms large
EUR/USD daily chart (EBS)


EUR/USD 25 delta risk reversals


Benchmark 1-month expiry FXO implied volatility

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