On August 1, there is one important FX option expiry to watch: the EUR/USD at the 1.1460 level. This option expiry does not match up with significant technical indicators, indicating it might have a limited impact on the market. However, it could help keep prices stable as the current trend favors sellers.

Key Focus: Moving Averages

We are closely watching the 100-day moving average, which is at 1.1361. The upcoming US jobs report is also drawing attention. With the EUR/USD option expiry at 1.1460 potentially capping today’s movements, it reinforces the downward pressure on the pair. This level is not a major technical obstacle, so we are focusing on the US jobs report expected later. The market seems set for sellers to maintain control, especially if the report shows a strong US economy. The bearish sentiment stems from differing central bank policies. Recently, US Core PCE data has remained steady around 2.7%, keeping the Federal Reserve cautious. Meanwhile, Eurozone HICP inflation has dropped to 2.1%. This difference supports a stronger dollar, making it harder for the euro to make gains. We are particularly attentive to the 100-day moving average at 1.1361, which is our key support level. A significant drop below this level, especially after a strong US jobs report, could indicate further declines. Therefore, we are considering buying put options with strikes around 1.1300 or 1.1250, set to expire in late August, in anticipation of a potential drop.

Market Impact of Policy Divergence

Reflecting on the sharp fluctuations during the Fed’s interest rate hikes in 2022 and 2023 reminds us of how quickly currency markets react to policy differences. While the current environment is less aggressive, we are again seeing that theme. One-month implied volatility for EUR/USD has increased from 6.5% to 7.2% in recent weeks, indicating that the market expects larger movements. Looking beyond today’s events, we should consider strategies that can benefit from ongoing downward pressure. Selling out-of-the-money call spreads with strikes above the 1.1500 psychological level could be a wise choice to earn premium. This strategy would profit from both a decline in the pair and time decay, aligning well with the current market sentiment. Create your live VT Markets account and start trading now.

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