EUR/USD: Investors add bets to position for weakness in the Euro
- EUR/USD printed its worst daily close in nearly three years on Tuesday.
- Risk reversals drop to lowest since October on put demand.
- Broader market sentiment and German data are likely to guide EUR/USD pair.
EUR/USD is looking south and investors are adding bets to position for deeper losses in the common currency.
Bearish daily close
The pair closed below 1.08 on Tuesday, confirming its weakest daily close since April 2017.
The daily and weekly candlestick arrangement shows the path of least resistance is to the downside.
Risk reversals hit lowest since October
Risk reversals on EUR/USD, a gauge of calls to puts on the common currency, plunged to their lowest levels since October on Tuesday, indicating investors are adding bets to position for further weakness in the euro.
One-month risk reversals fell to -0.55, the lowest level since Oct. 28. The negative number indicates the demand for put options (bearish bets) is higher than that for calls.
The common currency could suffer a deeper drop as anticipated by investors if the coronavirus-led risk aversion worsens, strengthening the haven demand for the US Treasuries.
At press time, the futures on the S&P 500 are reporting a 0.35 percent drop. As a result, EUR/JPY is flashing green near 118.80 and helping EUR/USD stay sidelined just below 1.08.
Apart from the broader market sentiment, the pair could take cues from the German Producer Price Index and Gfk Consumer Confidence Survey scheduled for release at 07:00 GMT.
Technical levels