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There are just a couple of key expiry levels to take note of on the day, as highlighted in bold below.
They are both for EUR/USD at the 1.1200 and 1.1225 levels, sandwiching the current spot price and holding within 15 pips of that either way. If anything else, that could see price action keep rather contained with the expiries having more of a pinning effect as the cut approaches later; all else being equal.
The dollar also weakened in trading yesterday, and that has seen the near-term chart in EUR/USD become more constructive for buyers. Price action is now sitting above both the 100-hour and 200-hour moving averages, with the key technical region seen at 1.1189-02 currently. So, those technical levels will add another layer of defense in keeping price action underpinned alongside the expiries near the figure level as we navigate through the sessions ahead.
Having said that, broader dollar sentiment and movement in Treasury yields can easily overwhelm expiry-related flows at this stage – especially with traders still feeling rather sensitive fresh off the US economic data dump this week. While hotter-than-expected inflation numbers from both the CPI and PPI have not sparked another round of selling in the bond market, inflation fears have not yet gone away. And traders are not getting all too carried away yet, with 10-year yields still holding well above 5% as we look to the final stretch of the week.
As such, the expiries at 1.1200-25 could potentially act as a near-term magnet ahead of the cut later. But at this juncture, I would argue that option expiries remain more of a secondary influence rather than a substitute for the prevailing market trend.
For more information on how to use this data, you may refer to this post here and/or refer to the Q&A below.
This article was written by Justin Low at investinglive.com.
