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

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.