The options markets may generate insight into the direction of the spot foreign exchange market and what traders may be fearful of. For our purposes here we will look at two measures for the euro, yen and sterling. The first measure is implied volatility and the second measure is the risk-reversal. Recall that puts and calls struck equidistant from the forward should trade for the same price. To the extent they don't reflects a bias in the market. Putting the two together is an exercise in foreign exchange forensics and may generate insight into spot and market psychology. Euro: Here in March 3-month implied ... (full story)