On July 24th, several FX option expiries will take place at 10 AM New York time. The EUR/USD expiries at the 1.1760 and 1.1800 levels are key. These levels are currently where the price is moving, which may help steady any upward movements. The pair is on a bullish trend, with the euro getting stronger against a weaker dollar.

Euro Area PMI and FX Option Expiries

Today, Euro area PMI data is expected, but it may not impact the ECB’s decision much. As a result, market reactions might be muted. The AUD/USD also has a significant expiry today. This may keep prices close to the 0.6600 level until later in the day when the expiry occurs. Despite this, a positive mood around risk keeps the AUD/USD in favor, moving away from recent highs near 0.6590-95. These expiries could strengthen the ongoing trend, unless there’s a shift in risk sentiment during trading. We believe traders should use these daily expiries as a guide for short-term positioning in the upcoming weeks. Large option strikes can attract price movement, which we can take advantage of by selling volatility through strategies like short strangles around these levels. Since currency volatility, as indicated by the Deutsche Bank Currency Volatility Index, has trended down for much of the year, this strategy may effectively capture premium decay.

Central Bank Policy and Market Implications

For the euro, the dynamics are changing due to differing central bank policies. The European Central Bank recently cut rates, while U.S. inflation data for May showed a slight cooling at 3.3%. The Federal Reserve’s direction remains the key factor. We recommend that traders consider buying EUR/USD call spreads to target upward movement, while managing risk in case the dollar strengthens unexpectedly. For the Australian dollar, the situation is influenced by global risk appetite and domestic issues. A positive mood helps, but the Reserve Bank of Australia is still worried about persistent domestic inflation, which was 3.6% in the first quarter. Therefore, we suggest using options to trade within a range to guard against weakness if any negative news emerges from China’s economy. We expect price action to stay steady around these technical levels until a major event occurs. Upcoming U.S. reports, such as retail sales and employment data, will likely lead to significant market shifts. Traders might want to purchase options with low implied volatility before these announcements to prepare for a potential breakout. Create your live VT Markets account and start trading now.

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