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Currency Market Influences

Today, August 7th, we have major option expiries that will likely affect currency movements. For EUR/USD, there are significant volumes between 1.1400 and 1.1800, with the most at 1.1600. This indicates a robust struggle between buyers and sellers at these important levels. New data adds to the situation, showing Eurozone inflation for July 2025 at 2.8%, a bit higher than expected. In contrast, the U.S. Federal Reserve is maintaining a “wait-and-see” approach from its June 2025 meeting. This difference in policy likely contributed to the range of options set to expire today. In the next few weeks, we should track where the price settles after today’s expiries. A sustained move above 1.1800 or a drop below 1.1400 could indicate the next significant trend. Until then, we expect price movement to be heavily influenced by these levels. For AUD/USD, we are focused on the large 3.1 billion expiry at the 0.6600 strike price. This level is acting as a major magnet for the spot price today, suggesting traders believe it’s a crucial pivot point. This emphasis on 0.6600 makes sense, especially considering the disappointing Chinese manufacturing data from last week and the Reserve Bank of Australia’s cautious comments on August 5th. These factors have pressured the Aussie dollar. We see the large expiry at 0.6600 as a protective barrier for the currency.

Impact on USD/JPY and USD/CAD

Looking ahead, we think the 0.6600 level will be a battlefield for the next few weeks. A clear break below could lead to a decline towards 0.6500. Traders should keep a close eye on this level for signs of either a strong rebound or a breakdown. For USD/JPY, there are expiries clustered between 147.65 and 148.50. The 1.4 billion expiry at 148.50 is particularly significant and may act as a ceiling for the pair. This indicates that although the uptrend has been strong, there is considerable resistance ahead. Historically, the Bank of Japan’s July 2025 meeting showed reluctance to significantly tighten policy, keeping the yen weak. However, the size of these options indicates that traders think the pair may be nearing its limit for now. The interest rate differential that helped the pair rise in 2023 and 2024 is still there, but the momentum might be waning. We predict that the pair could remain below the 148.50 level for the short term. In the coming weeks, strategies that take advantage of range-bound price action may work well. A strong catalyst would be needed to push past this heavy options barrier. Finally, in USD/CAD, the 1.2 billion expiry at the 1.3800 level is crucial. This figure is a key technical and psychological resistance point, indicating a potential turning point in the market. This situation is reinforced by stable WTI crude oil prices around $85 a barrel, which supports the Canadian dollar. This oil stability counters the broader strength of the U.S. dollar. The Bank of Canada is also expected to align with the Fed’s policies, adding to the tension around this level. We view the 1.3800 level as an important hurdle for the pair in the upcoming weeks. We will be on the lookout for either a rejection from this level or a decisive breakout above it. This could set the direction for the pair for the rest of the month. Create your live VT Markets account and start trading now.

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