FX Option Expiries for 31 August, 10am New York Cut
Key Takeaways
- •A large EUR/USD option expiry at the 1.1600 strike may keep spot pinned near that level until the contracts roll off.
- •The dollar strengthened after Fed chair Warsh's hawkish Jackson Hole remarks, sending EUR/USD back toward its 100-day moving average at 1.1570.
- •Fed rate odds for September are now close to a coin flip, a shift from earlier summer expectations of an imminent cut that has driven volatility across major pairs.
- •Month-end flows could add choppy trading conditions later in the day.
- •A USD/JPY expiry at 159.65 is unlikely to matter much, as intervention risk dominates while the pair climbs back toward 160, where Japanese authorities have previously warned against one-sided yen moves.
Only a couple of option expiries stand out on the day, as highlighted in bold below.
The first is for EUR/USD at the 1.1600 level. Large expiries like this can sometimes act as a magnet for price, as dealers hedging their option books near the strike may help keep spot pinned around the level until the contracts roll off. The dollar bounced back on Friday after Fed chair Warsh's more hawkish message at Jackson Hole, and that is largely setting the tone for major currencies heading into the new week.
In the case of EUR/USD, the drop brings the pair back close to its 100-day moving average at 1.1570, which should act as more of a floor for price action in the session ahead. The expiries above may play a role in limiting gains, with little else to work with during European trading later.
As long as the dollar does not find further momentum, the levels above are likely to keep EUR/USD in check before the expiries roll off. That said, dollar sentiment remains the number one key driver, with Fed odds for a September move now sitting closer to a coin flip. That marks a shift from earlier in the summer, when markets had been leaning more heavily toward an imminent rate cut, and repricing of those expectations has been a recurring source of volatility across major pairs.
Traders should also be wary of month-end flows that could crop up and keep things somewhat messy later today. From earlier: Heads up: Month-end flows might factor into play in the day ahead
There is also one expiry for USD/JPY at the 159.65 level. However, as noted many times before, expiries for this pair are unlikely to carry much influence given the current circumstances.
Intervention risk is the dominant factor at the moment. With USD/JPY climbing back toward 160, the pair is once again bordering on testing the limits of Tokyo and Washington officials. Japanese authorities have repeatedly warned against one-sided moves in the yen when the pair has traded near these levels previously, and that history is shaping how traders approach the 160 area now. That remains the bigger consideration affecting USD/JPY price action above all else.
For more information on how to use this data, refer to this post.
