EURUSD has traded between about 1.05 and 1.16 since 2015. While these bounds are pretty wide, this has been the longest period deprived of trends since the introduction of the single currency (refer above graph).
EURUSD should move towards the top of its range in a choppy way, generating unusual topside volatility along the way.
At this stage, we think it is legitimate to anticipate that this lasting range-bound period is poised to morph into a more directional market. Indeed, we forecast an overshoot above the 1.16 upper bound by year-end, but we expect the decline of the dollar to be quite choppy. We think euro appreciation should generate more volatility.
Buy EURUSD 6m call strike 1.15, European KI on the realized volatility at 9% Indicative offer: 0.60% (vanilla: 1.61%, volatility swap: 7.6%, spot ref: 1.1226)
Trade risks: limited to premium, soft euro, and volatility. This exotic option is a standard 6m vanilla call strike 1.15, which will be activated only if the realized volatility is above 9% at the expiry. If the volatility terminates lower, the option will be worthless even if EURUSD trades above 1.15.


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