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Please be noted that the bearish neutral risk reversals are still indicating bearish risks in longer tenors, while positively skewed IVs of the 6m tenor signifies the hedgers’ interests in OTM put strikes. These skews signal underlying spot FX to drop below 129 levels.
To substantiate this standpoint, if you observe the technical chart of this pair, the major trend has been rising higher above 50% fibos from the lows of 109.205 levels but restrained below 61.8%. The technical momentum indicators have also been substantiating overbought pressures in this consolidation phase (refer monthly chart). For more reading, refer our technical section.
Hence, keeping the both OTC and technical factors in mind, it is advisable to initiate below relative value trades.
Sell 6M EURJPY 25D risk-reversal (buy EUR calls - sell EUR puts), delta-hedged for risk-averse traders.
Buy 3M EUR puts/JPY calls vs. sell 3M 28D EUR puts/KRW calls for directional traders.
Buy 3m EURJPY ATM -0.49 delta puts for aggressive bears on hedging grounds.
Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 47 levels (which is bullish), while hourly JPY spot index was at shy above -133 (highly bearish) while articulating (at 07:23 GMT. For more details on the index, please refer below weblink:
http://www.fxwirepro.com/currencyindex.
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