Euro option trading surges! Investors are betting wildly on the euro hitting 1.20 USD

As the appeal of the US dollar weakens, the $300 billion foreign exchange options market has witnessed explosive growth in euro trading—daily trading volume of the euro has surpassed $56 billion, with investors betting wildly that this common currency will continue its strong performance, targeting the key resistance level of $1.20.

Data from the Depository Trust Company (DTC) shows that on June 26 (Thursday), the trading volume of the euro in the foreign exchange options market exceeded $56 billion, more than four times the second-ranked Japanese yen's trading volume of $13 billion, and five times that of the third-ranked Canadian dollar. Investors are focusing on euro call options, with the contract volume betting on the euro rising against the dollar to break $1.20 continuing to climb over the past week, indicating new funds are flowing into bullish euro strategies.

The euro broke above $1.17 on Thursday, reaching its highest level against the dollar since September 2021; since the low in February, the euro has risen more than 15%, just a step away from the $1.20 level reached in June 2021. Today, the euro's fluctuation is basically flat, reported at 1.1687.

Market bullish sentiment continues to rise, with data from the Commodity Futures Trading Commission showing that asset management companies' bullish sentiment on the euro has reached its highest level since early 2024. Hedge funds' bearish positions on the euro have also dropped to their lowest since April.

Continued pessimism on the dollar, multiple factors boost the euro's surge

What is driving the euro's "full sprint" strong momentum? Analysts point out that its rise is propelled by multiple key factors. First, the ceasefire agreement between Iran and Israel has significantly eased geopolitical tensions. At the same time, market expectations for the Federal Reserve's imminent interest rate cuts continue to ferment, putting pressure on the dollar.

Additionally, within Europe, Germany's historic large-scale fiscal spending plan acts like a shot in the arm, reigniting investor confidence that the European economy can finally break free from years of stagnation. On the monetary policy front, the European Central Bank's tightening cycle is nearing its end, contrasting with the Federal Reserve's potential interest rate cut path, which also benefits the euro.

Market participants generally believe the euro's momentum is strong. Shoki Omori, chief strategist at Mizuho Securities, stated, "Euro bulls are making a full sprint":

Euro bulls are making a full sprint, and we have seen this reflected in this week's options market... If Trump really shuts down trade, the eurozone will become the largest economy outside the US, and investors will want to trade this currency.

Antonio Ruggiero, a strategist at global payments company Convera, pointed out that "the euro will continue to benefit from the dollar's pessimistic sentiment":

The brief support for the dollar, stemming from geopolitical tensions and traditional safe-haven appeal, has almost disappeared, and the euro will continue to benefit from the ongoing pessimism surrounding the dollar.

Frances Cheung and Christopher Wong, strategists at OCBC Bank, are optimistic about the euro's potential as an alternative reserve currency:

The European Central Bank is nearing the end of its easing cycle, and the diversification of portfolio fund flows and reserves away from the dollar may benefit alternative reserve currencies like the euro.

Despite the bullish sentiment, ING strategist Francesco Pesole warns that the short-term fair value of the euro is overbought, and three major catalysts are needed to push it to 1.20—U.S. tariffs, a collapse in U.S. Treasury yields, or aggressive rate cuts by the Federal Reserve.

As the dollar's appeal wanes, the $300 billion foreign exchange options market has witnessed explosive growth in euro trading—daily trading volume for the euro has surpassed $56 billion, with investors betting heavily that this common currency will continue its strong performance, targeting the key resistance level of $1.20.

Data from the U.S. Depository Trust & Clearing Corporation (DTC) shows that on June 26 (Thursday), the trading volume of the euro in the foreign exchange options market exceeded $56 billion, more than four times the trading volume of the second-ranked yen at $13 billion, and five times that of the third-ranked Canadian dollar. Investors are focusing on euro call options, with the contract volume betting on the euro rising above $1.20 against the dollar continuing to climb over the past week, indicating new funds are flowing into bullish euro strategies.

The euro broke above $1.17 on Thursday, reaching its highest level against the dollar since September 2021; since the low in February, the euro has risen more than 15%, just a step away from the $1.20 level reached in June 2021. Today, the euro's fluctuation is basically flat, reported at 1.1687.

Market bullish sentiment continues to rise, with data from the Commodity Futures Trading Commission showing that asset managers' bullish sentiment towards the euro has reached its highest level since early 2024. Hedge funds' bearish positions on the euro have also fallen to their lowest since April.

Continued pessimism on the dollar, multiple factors boost euro surge

What is driving the euro's strong "full sprint" momentum? Analysts point out that its rise is propelled by multiple key factors. First, the ceasefire agreement between Iran and Israel has significantly eased geopolitical tensions. At the same time, market expectations for an imminent rate cut by the Federal Reserve continue to brew, putting pressure on the dollar.

Additionally, within Europe, Germany's historic large-scale fiscal spending plan acts like a shot in the arm, reigniting investor confidence that the European economy can finally break free from years of stagnation. On the monetary policy front, the European Central Bank's tightening cycle is nearing its end, contrasting with the potential rate cut path of the Federal Reserve, which also favors the euro.

Market participants generally believe that the euro's momentum is strong. Shoki Omori, chief strategist at Mizuho Securities, stated, "The euro bulls are making a full sprint":

The euro bulls are making a full sprint, and we have seen this reflected in this week's options market... If Trump really shuts down trade, the eurozone will become the largest economy outside the U.S., and investors will want to trade this currency. Foreign exchange and global payments company Convera strategist Antonio Ruggiero pointed out that "the euro will continue to benefit from the pessimism surrounding the dollar":

The brief support for the dollar, stemming from geopolitical tensions and traditional safe-haven appeal, has almost disappeared, and the euro will continue to benefit from ongoing dollar pessimism.

OCBC Bank strategists Frances Cheung and Christopher Wong are optimistic about the euro's potential as an alternative reserve currency:

The European Central Bank is nearing the end of its easing cycle, and the diversification of portfolio fund flows and reserves away from the dollar may benefit alternative reserve currencies like the euro.

Despite the bullish sentiment, ING strategist Francesco Pesole warned that the euro's short-term fair value is overbought, and three major catalysts are needed to hit 1.20—U.S. tariffs, a collapse in U.S. Treasury yields, or aggressive rate cuts by the Federal Reserve