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Options Price In Further Losses for EUR/PLN

  • No surprise to see a surge in options volumes following the elections results, with markets rushing to price in a firmer PLN than expected into year-end.
  • Markets now price a 27% implied probability of EUR/PLN trading below the year's lows (4.3986) on Dec31, up from 15.3% pre-election.
  • The rally in spot PLN has put EUR/PLN well below analyst consensus for Q4 (consensus: 4.60, current spot ref: 4.4672), while implied vols have taken a marked leg lower post-election to price-out the near-term election risk.
  • Front-end risk reversals have also been pressed lower throughout, with 1m RR touching 0.9 points in favour of calls today, the lowest level since February last year. This finally erases the war premium priced in at the beginning of the Russian invasion of Ukraine.
  • Technically, the cross is now approaching oversold territory, with the RSI touching 30 and the lowest level since May at typing. Nonetheless, markets have taken out key support at 4.4690 Monday, and a close below this mark would be a bearish development.
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