USD has been waiting for December month very curiously, we reckon dollar is most likely to be supported next week after FOMC minutes optimistic readiness of the board to begin the monetary normalization cycle as soon as December.

With fed fund futures already pricing about a 70-80% chance of a hike this year, we would expect a modest upward move in the USD as the market fully prices in December as the lift-off date.

The table showing the implied volatility for near month at the money contract of this G7 major has been highest among currency pool, inching higher day by day to perceive at 13% for 1m expiry.

While delta risk reversal reveals downside hedging activity has also been piling up gradually for next 1 month.

As a result we can understand ATM puts have been costlier where the FX market direction of this is heading towards 1.0595 and 1.0505 technical levels. Currently, it is struggling at 1.0675 levels.

The OTC options market appears to be more balanced on the downside over the 1w to 1m time horizon.

Hence, EURUSD's higher IV with negative delta risk reversal can be interpreted as the market reckons the price has downside potential for large movement ahead of FOMC season which is resulting derivatives instruments for downside risks have been overpriced.

But any spikes in this pair in near term can be attributed as shorting opportunity in our back spreads.

As shown in the nutshell,

Contemplating the above risk reversal computations and Capitalizing on higher IV, we eye on shorting (1%) 1w in the money put (this would match 1w risk reversals) which would lock in certain yields by initial receipts of premiums.

Therefore, 3 lots of 1m ATM -0.50 delta puts are preferred to suit the prevailing losing streaks. So thereby the spread would be executed for net debit and the cost is reduced by short side.