EUR/USD: Put value hits six-week high ahead of the ECB

• EUR/USD risk reversals fell to lowest level since September 11, indicating a rise in value of put options (bearish bets).
• The European Central Bank (ECB) is expected to keep rates unchanged and reiterate commitment to end asset purchases in December.

The EUR/USD one-month 25 delta risk reversals (EUR1MRR) fell to a six-week low of -1.1 Thursday, signaling a rise in the implied volatility premium (or demand) for the cheap out of the money EUR put options (bearish bets).

The increased demand for the puts validates the EUR's downside break of the key support of 1.1422 (61.8% Fib R of Aug. low/Sept. high).

Clearly, the EUR is on the defensive ahead of the ECB rate decision. Analysts at Nomura do not think there is urgent need for the ECB to change guidance and hence they expect the central bank to retain its “extended period” wording in relation to the stock of asset purchases, and “through the summer of 2019” for rates on hold.

EUR1MRR