BUZZ-COMMENT-Orders and hedges offer clues for the EUR/USD outlook

Jan 27 (Reuters) - EUR/USD has staged a decent recovery from 2-year lows at 1.0177 on Jan 13. Customer orders and price action in forward looking FX option markets might now offer clues about subsequent EUR/USD expectations.

EUR/USD's recovery from 1.0177 peaked at 1.0523 on Friday and subsequent setbacks have met demand in the mid 1.04's. Dealers say there are now more dip buyers, while others prefer to keep their powder dry to sell the USD if it comes under renewed pressure.

FX options have seen a huge reduction in FX volatility risk premiums since Donald Trump began his second presidency without the extreme trade tariffs he threatened during his campaign. Implied volatility which measures that risk and determines the option premium, is significantly lower, although losses have since stalled with the market facing both Fed and ECB policy announcements and some key euro zone and US data risks this week.

However, FX options have been slower to lower their downside vs upside strike volatility risk premiums as shown by risk reversal contracts, especially for longer dated expiries. These options are a lower cost hedge against any renewed EUR/USD weakness and heightened volatility and demonstrate caution concerning the simmering potential for a resurgent USD.

Technically EUR/USD resistance lies at the 38.2% Fibo retracement of the 1.1214-1.0177 drop at 1.0573, Dec 6 peak at 1.0630, daily cloud top at 1.0635, 100-dma 1.0673, 50% Fibo at 1.0695 and 200-dma 1.0770.

If EUR/USD starts to break those levels and emboldens more USD shorts, then it will increase the potential toward the 1.0937 peak posted before the post U.S. election slide.

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