USD/JPY has an option expiry at the 148.00 level on July 28 at 10 AM New York time. While this level isn’t tied to any major technical levels, it might still affect price behavior leading up to the expiry later that day. Market focus remains on trade developments, especially the US-EU trade talks. There are not many other important events happening at the start of the week.

Impact Of Large Option Expiries

Large option expiries can affect short-term price movements, often keeping the currency pair close to a specific level. Even though the 148.00 level has passed, traders should keep an eye on other significant expiries, like the recent interest around the 157.50 and 158.00 levels. These can pull prices toward them, especially when there’s no major economic data released. The market is also keeping watch on the differences between the Federal Reserve’s and the Bank of Japan’s policies. Recent US inflation data, like the core Personal Consumption Expenditures (PCE) index dropping to 2.6% annually, suggests the Fed could lower rates later this year. However, comments from leaders like Chairman Jerome Powell stress a focus on data, adding some uncertainty. This situation is very different in Japan, where officials are worried about the yen’s weakness. We should be particularly alert for intervention, especially as USD/JPY nears the 158 level. This area prompted significant yen-buying by authorities in late April and May 2024. Statements from Finance Minister Shunichi Suzuki and Governor Kazuo Ueda indicate that they may not tolerate further depreciation.

Trader Caution And Strategy

Given these circumstances, traders should be careful about driving the pair higher, as there is a notable risk of sudden drops due to official actions. Selling volatility through options might seem attractive because of the pinning effect of expiries, but holding long put options could serve as a good protection against intervention. This market requires a strategy that prepares for both calm periods and sudden price changes. Create your live VT Markets account and start trading now.

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