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2025-07-30 16:06:40
[Undercurrents Beneath the Calm: The Truth Revealed by the EUR/USD Options Market] (1) By the evening of July 30th (Beijing time), implied volatility on EUR/USD foreign exchange options had fallen to its lowest level since March of this year. (2) This reflects low realized and expected volatility in the current foreign exchange market, with the exchange rate trading closely within a range. (3) Risk reversals typically indicate the premium of options in one direction relative to another. (4) Currently, the 25-delta risk reversal indicator below three months is neutral, indicating a lack of clear directional market bias. (5) Despite this, the market still holds a high number of call options (topside strikes), particularly in longer-dated contracts. (6) At the same time, demand for put options (downside strikes) has been very limited, with no significant increase even amid the recent US dollar rebound. (7) Notably, the foreign exchange volatility risk premium, which measures the risk of Federal Reserve events, also hit a year-long low on Wednesday. (8) This low volatility trend is not unique to EUR/USD but is prevalent across the broader G10 currency market. ⑼ This suggests that current market sentiment is generally cautious, with investors awaiting clearer guidance. ⑽ Low volatility may also indicate that the market is likely to experience significant volatility once a new catalyst emerges.
