EUR/GBP risk reversals retrace bullish bias

• EUR/GBP one-month risk reversals indicate falling demand for EUR calls

Risk reversals

• EUR one-month risk reversals fell to 0.162 on Monday; its lowest level since Oct. 5. The recent high stands at 0.40 (Oct. 11 high). The decline indicates falling demand for bullish bets (call options) on the EUR/GBP.
• It adds credence to the rising UK-German yield spread.

Yield differential

• The 10-year spread currently stands at 97 basis points; the highest level since early February.

The combination of falling EUR/GBP risk reversals and rising UK-German yield spread indicates the EUR/GBP cross could soon test the 200-day MA support of 0.8755.