There are a couple of key expiry levels to take note of on the day, as highlighted in bold below.
The first ones are for EUR/USD with the expiries at 1.1200 and 1.1250, sandwiching the current spot price near 1.1230. Given the size and potential for the expiries to act as near-term magnets, especially if price action is rather subdued, then that could very well contain movement in the currency pair to between the 1.1200 to 1.1250 region in the session ahead.
Dollar sentiment will of course continue to be a key driver on its own though, influenced by what is happening in the bond market. Treasury yields retreated yesterday and that saw the dollar pull back slightly on the week, with EUR/USD finding some conviction to push back above 1.1200.
But all else being equal, the expiries at 1.1200 and 1.1250 are likely to help contain price movements. Besides that, the 200-hour moving average at 1.1260 that could add another layer to potential resistance alongside the expiries at the upper bound at 1.1250 on the day.
Then, there is one for USD/JPY at the 158.00 level that is keeping within 10 pips of the spot price currently. The concentration here could help anchor trading around the figure level ahead of the cut, barring any significant moves in Treasury yields.
And lastly, there is one for AUD/USD at the 0.7000 level that is keeping within 20 pips of the spot price currently. The expiries here could attract some attention if the aussie attempts a recovery, although broader dollar sentiment remains the more important driver.
In other words, it could act as a potential near-term magnet in capping price gains closer to the figure level in the session ahead.
But as mentioned, the movement in Treasury yields and the dollar will continue to be the bigger driving force as we look to close out the week. So, don’t rule that out in terms of potential impact on price action. The expiries might have some say but there are also other key drivers of trading sentiment in play.
Looking to Monday next week, there isn’t much of anything on the expiries board and understandably so as it will be a US market holiday. So, that explains the lack of option interest in the beginning of next week.
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.