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EURUSD has potantial for a spike up to 1,4000

According to 3 month and 1 month risk reversals eurusd pair may peak around 1,4000 level in the coming weeks. Risk reversal can roughly be defined as a measure of demand for OTM calls over OTM puts. Basically when risk reversal goes down, we could get a bearish reading on the market sentiment while a ascending risk reversal chart may indicate bullish market sentiment for the underlying asset.

The first chart below shows the eurusd pair vs 1 month and 3 month risk reversals. As displayed in the chart, risk reversal have already turned north 5 weeks ago, but prices are still struggling for a direction. Looking back to 2008-2009, we see a similar pattern where risk reversals had made their move (orange line 1), while the prices accompanied almost 1-2 months later (orange line 2). A couple of month from now... we may be looking at the same picture (orange line 3).  Another point may be the case displayed in the second chart; put/call ratio for the eurusd contract seems to have hard time pushing the ratio above 2,50. Actually there has already been a rejection twice, which may be a sign for an interim bottom for the eurusd pair.

Last, no big indicator, but just to keep an eye on it, short term volatility of the pair has come to extreme low levels, which may mean something is in the making for the euro.