As we saw in our recent risk reversal computation of EURUSD, we may see little upside movements but those rallies may lose momentum and holds stronger for next 1 month or so, certainly not in a long run.

Please be noted that the delta risk reversal numbers are getting higher positive values but losing OTC volumes (thereby flashing at -0.65 for 1 week expiries). As there is contraction between historic and implied volatility, the volatility smiles most frequently show that traders are not willing to pay higher implied volatility prices, as a result, the strike price grows aggressively out of the money.

You can even see these effects already in intraday charts, the minor threats of price corrections are popping up. A sharp shooting star candlestick pattern has evidenced the dips from highs of 1.1237 to today's lows 1.1162 while leading momentum indicators signal further weakness.

Hence, eyeing on the risk reversal arrangements in OTC FX markets, we reckon the recent bull rallies are losing the momentum.

Thus, many of the analysts must be waiting anxiously to hear what Fed Chair Yellen has to say tomorrow in her testimony. The flattening trend in the US 2y10y has now extended to 89bp (EU 2/10y IRS 75bp). EU 5y5y forwards have dropped to 1.47%, a new low.

The implied probability of a March rate hike by the Fed crashed to 0% after having risen from 8% to 12% on Friday after the US NFP print. Economic and Fed logic dictate a different scenario but the market is having other thoughts and financial conditions are unfortunately tightening fast on the back of the meltdown in stocks and ballooning of credit spreads, the latter to the highest level since the June 2013 taper tantrum.

We had advocated options straps recently (on 1st to be precise), we are certain that those ATM calls would have fetched you the handsome gains. So for now, we think it is better to unload the weights in this strategy to book profits and stay hedged to reflect the effects ATM straddles. Contemplating these risk reversal flashes fresh ATM straddles positions could also to be initiated on tomorrow's Janet Yellen's monetary policy minutes.