Euro: EUR/USD risk reversal long setup – TD Securities

TD Securities' Macro Research Insight recommends going long EUR/USD via a three-month zero-cost risk reversal, buying a 1.1610-strike call and selling a 1.11-strike put. The strategy aims to fade the recent EUR/USD selloff near year-to-date lows, with catalysts including September month-end rebalancing and softer US payrolls, and is aligned with TD’s bullish year-end EUR/USD forecast.

TD fades EUR/USD downside via options

"We go long EURUSD via 3m zero-cost risk reversal (buy 1.1610-strike call funded by short 1.11-strike put). September month-end rebalancing, softer US payrolls, and stretched USD uptrends are imminent catalysts for the USD rally to consolidate."

"We maintain a bullish year-end EURUSD forecast as we continue to see near-term Fed rate hike as priced-in while growth in RoW remains resilient."

"With EURUSD trading close to the year-to-date low, we like to fade the EURUSD selloff via zero-cost risk reversal (spot ref 1.1322, buy 1.1610-strike call at 5.87 vol ref and sell 1.11-strike put at 6.40 vol ref, expiry Dec 30 2026)."

"We see September month-end rebalancing and US payrolls as imminent catalysts for the USD rally to consolidate."

"Into year-end, we maintain our bearish USD forecasts as we see near-term Fed rate hikes as largely priced in while growth in rest of the world remains resilient."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)