The USD was under pressure after U.S. CPI and good demand for U.S. 30-year bonds Tuesday, but losses stalled in London Wednesday as U.S. 10-year yield setbacks met demand, with key currency levels in play, too.
Many implied volatilities are near pandemic lows and a discount to historic volatility, suggesting value.
Demand for USD put options that might precede steeper USD declines are yet to materialise, although downside premium on one-month USD/JPY risk reversals has regained highs since January at 0.5. While that warns of more spot losses, they may prove hard-fought -- implied volatility remains low. Good-size expiries around 109.00 may contain spot this week.
EUR/USD shorter-dated implied volatility saw minor gains, but EUR call/USD put premiums are barely changed (0.1 in 1-month), and demand is minimal for outright high strikes. Big resistance and barriers surround 1.2000.
AUD/USD capped by 0.7700 barriers, with front-end implied volatility at pandemic lows.
One-month cable vol retested 7.0 from 6.8 Tuesday, but with spot holding ranges, demand is limited.
(Richard Pace is a Reuters market analyst. The views expressed are his own) ((Richard.Pace@thomsonreuters.com))
