ING data shows EUR/USD three-month traded volatility at 5.7%. This is more than 1% below realised volatility and near the 5.2% to 5.3% lower end of the past five-year range.
A flat risk reversal, based on the pricing gap between a euro call and an equivalent euro put, suggests the pair may stay range bound. ING notes EUR/USD may edge lower in the next few sessions due to slightly higher upside risks for oil prices.
Low Volatility Range Trading
ING expects buying interest around 1.1650 if the pair falls. Events in focus include the second estimate of Eurozone 1Q26 GDP, forecast at 0.1% quarter-on-quarter, and remarks from European Central Bank speakers.
Later speeches from Christine Lagarde and Philip Lane may affect expectations for a June ECB rate rise. The article states it was produced using an AI tool and reviewed by an editor.
Based on the current environment, we see that three-month implied volatility for EUR/USD is extremely low, trading near 5.7%. This tells us the options market is not pricing in any big moves for the pair in the near future. The best approach in this regime is to favor range-trading strategies over those that bet on a new, strong trend emerging.
With options being relatively cheap, selling premium appears to be an attractive strategy for the coming weeks. We can look at selling strangles, which involves selling an out-of-the-money call and put, to collect income as long as the currency pair remains between two set levels. The flat risk reversal, showing little bias for calls over puts, further supports the view that the market is expecting sideways price action.
This view is reinforced by recent economic data, with April’s Eurozone headline CPI coming in slightly hot at 2.6% while US job growth in the last non-farm payrolls report slowed to 160,000. This divergence suggests the European Central Bank is under more pressure to act than the Federal Reserve, which pins the EUR/USD in its current range. Therefore, we should anticipate the market to remain contained between major technical levels.
Key Risks And Catalysts
We do see a slight short-term risk to the downside, especially if oil prices continue their recent push above $85 a barrel, which tends to weigh more heavily on the European economy. This could push EUR/USD down toward the 1.1650 level, which has proven to be a solid floor of buying interest. Traders could consider buying cheap puts as a hedge or view that 1.1650 level as a strong point to sell put options against.
The main event to watch for is this evening’s speeches from ECB officials Lagarde and Lane. We expect them to firmly signal a rate hike for the June meeting, which should provide support for the euro. Any hesitation or dovish surprise from them would likely see the euro get hit and potentially test the lower bounds of the current range.
Looking back, this period of low volatility feels similar to the quiet summer we saw in 2025, right before inflation data surprised markets in the autumn. We remember how realized volatility picked up sharply then, catching many premium sellers off guard. It’s a reminder that even in a calm market, we must remain prepared for a sudden shift.
