Aug 24 (Reuters) – By their forward-looking nature, FX options pricing, flows, and positioning can offer an insight into expectations for EUR/USD. Lately, investors have been buying options that would benefit from more EUR/USD gains over coming months, looking for an eventual break of huge barriers at 1.2000.
Risk reversals show this strong lean. Dealers hiked prices for EUR calls over puts – the right to buy EUR/USD versus sell it on a future date.
Ignoring the early March panic pricing, the EUR call over put premium reached multi-year highs in August, and while it remains intact, shows dealers haven’t changed their view of further EUR/USD gains.
However, one-month expiry risk reversals have dropped back to 0.4 from 0.85 premium for EUR calls over puts, so the near-term risk of more EUR/USD gains is perceived to be faltering for now. Setbacks in three- to 12-month contracts are more limited, and