HALISTER1: EUR/USD Slide at Odds With Becalmed Bund/UST Spread: Charts

EUR/USD Slide at Odds With Becalmed Bund/UST Spread: Charts

(Bloomberg) -- As EUR/USD attempts to close at the lowest level since 2003, the strongly correlated bund/UST 10Y spread is treading water with EUR two-week option put premium showing dwindling appetite to add fresh downside bets, Bloomberg FX strategist Sejul Gokal writes.
  • See chart here; spread hit -226bps vs -238bps multi-year wide seen on Dec. 27
  • 30-day rolling correlation between EUR/USD and bund/UST spread has been strong and stable at around +0.90
  • Move in EUR/USD may struggle to sustain should yield spread not follow; 1-week 25d risk-reversals at 40bps for EUR puts, while slightly higher today, have been steadily falling since mid-December high of 99bps
  • Large expiries in the back-end of this week at 1.05, totaling EU3.7b, may contain fall and attract price toward significant strike level; 21-DMA at 1.0504
  • Support at 1.0372 (Dec. 18 low) and 1.0352 (Dec. 20 low)
  • NOTE: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

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