French posted lackluster composite PMI numbers at 51.3 which is way below forecasts at 52.5.
Markit manufacturing PMI was at 50.8 slightly above forecasts at 50.7.
Markit Services PMI came in at 51.3 below forecasts (52.6) in November.
While Germany reported healthy composite PMI at 54.9 which is well above forecasts at 54.0.
German manufacturing looks robust at 52.6 versus forecasts at 52.0.
German service PMI flashed at upbeat 55.6 versus forecasts at 54.3.
On the flip side, USD has been waiting for December month very curiously, we reckon dollar is most likely to be supported next week after FOMC minutes optimistic readiness of the board to begin the monetary normalization cycle as soon as December.
With fed fund futures already pricing about a 70-80% chance of a hike this year, we would expect a modest upward move in the USD as the market fully prices in December as the lift-off date.
Which in turn prompted hedging activity for currency downside risks, as a result we can understand ATM puts have been costlier where the FX market direction of this is heading towards 1.0595 and 1.0505 technical levels. Currently, it is struggling at 1.0635 levels.
EURUSD's higher IV with negative delta risk reversal can be interpreted as the market reckons the price has downside potential for large movement ahead of FOMC season which is resulting derivatives instruments for downside risks have been overpriced.
But any spikes in this pair in near term can be attributed as shorting opportunity in our back spreads.
We eye on shorting (1%) 1w in the money put (this would match 1w risk reversals) which would lock in certain yields by initial receipts of premiums.
Therefore, 3 lots of 1m ATM -0.50 delta puts are preferred to suit the prevailing losing streaks. So thereby the spread would be executed for net debit and the cost is reduced by short side.


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