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### POV: EUR/USD SMILE CURVE FEARS A....>

EURO-DOLLAR
EURO-DOLLAR: ### POV: EUR/USD SMILE CURVE FEARS A TUMBLE IN THE SPOT PRICE
-The significant shift in the EUR/USD smile curve over the past seven days
toward out-of-the-money puts shows a market that's becoming increasingly wary of
protracted downside. This time last week, the EUR/USD smile was skewed
(slightly) toward OTM calls, but the >2% rally in USD index has raised the real
prospect of a lengthy recovery in the greenback.
-As a result, the curve has shifted significantly to skew towards OTM puts for
the first time since last year. The change in sentiment toward EUR/USD is most
evident when comparing against the early January smile curve, which is an almost
exact mirror image of today's construct.
-This change in sentiment has hurt some of the most profitable trading
strategies for EUR/USD, including the K-band and Rex oscillator programs, which
are currently suggesting losing long positions despite being among the most
successful strategies of the past 12 months.
-The proximity to next week's key German inflation numbers and advanced Q1 EZ
GDP figures may heighten EUR/USD's sensitivity over the coming sessions.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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