Currency Volatility EUR Talking Points
- EUR/USD Volatility Rises as ECB Risk is Captured
- Risk Reversals Flip to Positive
Top 10 most volatile currency pairs and how to trade them
For a more in-depth analysis on FX, check out the Q2 FX Forecast
Source: Thomson Reuters, DailyFX
G10 FX Implied Move
Source: Thomson Reuters, DailyFX
EURUSD | Overnight Options Capture ECB Meeting
1-day implied volatility is highest in EUR/USD across the G10 complex as it now captures the ECB monetary policy meeting. Alongside this, vols are also notably higher than prior ECB meetings throughout 2019 with ATM break-even straddles implying a move of 55pips. The ECB meeting is likely to reiterate the downside risks to the Eurozone economy given the weaker than expected data, while the latest staff projections could show yet another downgrade to inflation and growth forecasts thus potentially tempering recent gains in the Euro.
EUR/USD Risk Reversals Flip to Positive
However, with that said, EUR/USD risk reversals have recently flipped to positive, meaning option players are now seeking protection for further gains as calls trade at a premium to puts. This has largely stemmed from fuelling bets that the Federal Reserve will carry out “insurance” rate cuts with money markets aggressively pricing in 2 rate cuts by the year-end. Consequently, dovish commentary from the Federal Reserve could underpin the currency, as it has done over the last week.
EUR/USD Technical Outlook
Having made a break above the double top (1.1265) eyes are now on for a move towards the downtrend from the 2019, which also coincides with the psychological 1.13 handle, providing the currency manages to close above the double top. On the downside, support is situated at 1.1220.
EURUSD Price Chart: Weekly Time Frame (Oct 2018 – June2019)
--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.mcqueen@ig.com
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