On September 3 at 10 AM New York time, key FX option expiries for EUR/USD are at the 1.1590-00 and 1.1675-80 levels. These points are important for guiding possible price changes during the trading session. While the market seems quiet, changes in global bond yields could still affect prices. The specified expirations might influence price movements if current market sentiment extends into US trading hours. Today, significant EUR/USD option expiries provide a framework for prices around 1.1600 and 1.1680. These levels could help keep trading steady in the short term. However, the larger trend that will influence movements in the coming weeks is the recent sharp rise in global bond yields. The main catalyst is the market’s response to ongoing inflation, prompting a reevaluation of central bank policies. Last week, the US 10-year Treasury yield jumped from 4.1% to over 4.5% after August 2023 inflation data surprised at 3.8%. Similarly, German 10-year bund yields have increased above 3.2%, indicating this is a widespread concern. This situation is making traders anxious, as it suggests that both the Federal Reserve and the European Central Bank may need to maintain aggressive interest rate policies. The market is now anticipating a higher chance of more rate hikes from both banks before the year ends. This shift is behind the sell-off in bonds and the rise in yields. We have witnessed similar patterns before, especially during the turbulent periods of 2023 when central banks were racing to manage inflation. In those times, sharp moves in bond yields often led to significant changes in currency markets. History indicates that we should brace for similar rapid shifts to return. For derivative traders, this means we can expect higher volatility in the coming weeks. Implied volatility on one-month EUR/USD options has risen from around 6% to nearly 8% in the last ten days, making options pricier. This suggests using strategies that profit from large price changes, like buying straddles or strangles ahead of key data, such as this Friday’s jobs report. While today’s expiries may act as temporary stopgaps, the ongoing pressure from bond markets indicates that the 1.1600-1.1680 range will likely break soon. The smarter move is to prepare for a breakout, as the current calm appears short-lived. We should be alert for a significant shift driven by upcoming inflation or employment data.

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