EUR/USD: options markets unveil potential pullback

CME Group’s preliminary data for the 6EU7 contract expiring on August 4 showed strong activity in ITM (‘in the money’) Puts, rising by 925 contracts vs. the previous day and mainly in the 1.1600 strike price. Further data saw OTM (‘out of the money’) Puts rising by 536 contracts.

Activity in ITM Calls showed a marginal drop of 1 contract while OTM Calls rose by 723 contracts, mostly in the 1.1850 strike price and seconded by 1.1750 and 1.1900.

The Put/Call ratio ticked a tad higher to 0.99.

EUR/USD vigilant on ECB

Options markets keep leaning towards the bearish side so far in EUR/USD, as there is room for disappointment at the ECB meeting tomorrow as well as the well-known axiom ‘buy the rumour, sell the fact’ among traders. This idea is reflected in the increase of ITM Puts by more than 900 contracts mainly in the 1.16 strike price. Furthermore, the increase in OTM Calls suggests sellers protecting themselves in case the expected move backfires.

All in all, the ECB will be the main catalyst for the pair’s price action in the very near term, although in the longer run fundamentals keep looking north.