EUR/USD expiries are observed between 1.1525 and 1.1550. This may temporarily stabilize prices, particularly before U.S. trading, as the pair has dropped significantly this week and is now testing the 38.2 Fibonacci retracement level at 1.1537. For USD/CAD, there’s an expiry at the 1.3775 level, which coincides with previous highs from June and mid-July. While this isn’t a critical level, it might act as a support before North American trading begins, where U.S. data and meetings from the BOC and Fed will be important.

Focus on EUR/USD

Today’s significant option expiries in EUR/USD, centered around the 1.1525 to 1.1550 range, are currently keeping the price stable. This comes after a sharp decline this week, leading the pair to test a crucial support level at 1.1537. The market is considering Eurozone inflation data from last week, which at 2.5% suggests that the European Central Bank might need to maintain higher rates longer than the U.S. Federal Reserve. For derivative traders, this creates a lot of pressure just hours before the Federal Reserve’s interest rate decision. We see the implied volatility for one-month EUR/USD options rising to 6.8%, up from 6.2% earlier in July, as traders expect a significant movement. A hawkish Fed today could break through the 1.1500 level, while any indication of a dovish shift could push the pair back toward recent highs. In USD/CAD, the significant option expiry at 1.3775 is keeping the price steady near the highs from June and early July. This level is essential as traders weigh different outlooks from central banks, especially since recent Canadian inflation data remains close to the Bank of Canada’s target of 2.7%. The upcoming BOC statement will be critical in determining if the pair can move higher.

Upcoming Market Trends

Looking ahead, we see a scenario similar to late 2023, when markets misjudged the timing of Fed rate cuts, leading to a sudden dollar rally. Traders should be on the lookout for potential spikes in volatility around central bank announcements, which could make strategies benefiting from large price movements appealing. The market’s response today will likely set the trading direction for the upcoming weeks. Create your live VT Markets account and start trading now.

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