On August 20, FX option expiries will take place at 10 AM New York time. Key levels to watch are EUR/USD at 1.1600 and 1.1650, as the pair has recently dropped due to a stronger dollar. These expiries may limit price changes during European trading since there are no major news events expected.

Potential Impact Of UK CPI Report

Additionally, GBP/USD expiries at the 1.3500 level are close to the 200-hour moving average of 1.3504. The upcoming UK CPI report could have an effect here. However, traders expect a 94% chance that the Bank of England will keep rates steady in September, which limits the pound’s potential movements. As a result, these expiries may cap any significant gains during the session. We’re observing a similar trend today, where large option expiries can stabilize price action in a quiet summer market. Remembering how levels like 1.1600 in EUR/USD attracted price action in previous years is helpful for today’s context. The current focus is on the slight policy differences between the Fed and the ECB, especially with the Jackson Hole event approaching. For EUR/USD, a large amount of options will expire at the 1.1000 strike later today, likely keeping the pair within a narrow range. The euro has struggled to gain traction after data revealed that eurozone industrial production fell by 0.5% last month, highlighting the ECB’s cautious approach. After the high volatility of 2022 and 2023, traders are using these large expiries to establish short-term trading boundaries. In GBP/USD, there is a significant expiry at the 1.2800 level, which may act as support for now. This is following UK retail sales data from last week, which showed an unexpected 0.8% decline, impacting the pound’s outlook. Markets see only a 15% chance of a rate cut by the BOE in September, but the weak data is limiting any rallies toward 1.2900.

Strategic Use Of Options

In the coming weeks, traders should think about using options to manage risks around key data points instead of chasing breakouts. This summer slowdown, similar to markets before 2022, presents an opportunity to prepare for a potential rise in volatility as the late August Jackson Hole symposium approaches. Currently, low implied volatility makes it relatively inexpensive to buy protection for future events. Thus, we are looking for chances to use short-dated options to navigate the range-bound trading caused by these expiries. Longer-term strategies will likely wait for clearer signals from central bank representatives next week. The key is to stay patient, as the market appears balanced until a new catalyst arises. Create your live VT Markets account and start trading now.

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