FX Option Expiries for 7 August, 10am New York Cut
Key Takeaways
- •EUR/USD option expiries at the 1.1500 level carry limited technical significance and are unlikely to materially influence price action ahead of the US jobs report.
- •EUR/USD has dropped below its 100-hour moving average at 1.1529 and failed to test the 100-day moving average at 1.1567, with the 200-hour MA at 1.1488 as a potential downside target if non-farm payrolls triggers a move lower.
- •Traders are regaining confidence in pushing USD/JPY higher, but Japanese authorities' repeated warnings against excessive yen volatility mean intervention risk remains a live concern.
- •The non-farm payrolls report is expected to be the primary market-moving event, as it directly informs Federal Reserve policy expectations and typically drives sharp repositioning across dollar pairs.
- •An EUR/GBP option expiry at 0.8550 is unlikely to have meaningful impact given the muted trading sentiment anticipated in European sessions before the US data release.
Only a handful of option expiries stand out on the day, as highlighted below.
The first notable expiry is for EUR/USD at the 1.1500 level. Large option expiries can sometimes act as a price magnet as the cut approaches — a phenomenon often referred to as "pinning" — as dealers hedging their books may lean price toward the strike. However, these particular expiries carry little technical significance and are unlikely to exert much influence — particularly with the pair confined to an exceptionally tight range of just 7 pips today as markets await the US jobs report. Some extension in price action may occur during the European morning session, but it is not expected to amount to much.
EUR/USD has dropped back below the 100-hour moving average at 1.1529, following a failure to test the 100-day moving average, currently at 1.1567. In this context, the expiries could serve as a floor for any downside price extensions, with greater attention on the technical levels overhead. Should the non-farm payrolls release trigger a move lower, the 200-hour moving average at 1.1488 would come into focus.
Dollar sentiment remains the dominant factor, with traders gradually regaining confidence in pushing USD/JPY higher. Japanese authorities have repeatedly warned against excessive currency volatility, and verbal or direct intervention remains a live risk whenever the yen weakens sharply. Intervention risks will therefore continue to be a key consideration heading into the end of the week.
There is also an expiry for EUR/GBP at the 0.8550 level. However, given the muted sentiment anticipated in European trading ahead of the non-farm payrolls release, little impact is expected on the pair. Today's expiries are similarly unlikely to generate any significant shift in market mood.
The non-farm payrolls report is among the most market-moving pieces of US economic data each month, as it directly informs Federal Reserve policy expectations and tends to drive sharp repositioning across dollar pairs. Major currencies are expected to remain quiet and range-bound until that release, all else being equal.
For further details on how to interpret this data, see the explanatory post here: https://investinglive.com/Education/!/forexlive-education-option-contracts-their-impact-and-how-to-trade-off-them-20161116/