FX option expiries for 19 September at the 10 am New York cut feature two main levels to note. These expiries are for EUR/USD at the 1.1750 and 1.1800 levels.
The current price action is encased by these levels, potentially setting the range for European trading. This occurs as markets process the effects of recent Federal Reserve announcements.
Modest Recovery Of The Dollar
A modest recovery of the dollar coincides with this, following an overnight surge in bond yields. These yields have since stabilised.
The large option expiries at 1.1750 and 1.1800 are holding EUR/USD in a tight range today, which is typical as we digest the Federal Reserve’s more aggressive tone from this week. This pinning effect provides a moment of calm before the market likely resumes its underlying trend. The key is to look beyond this temporary stability.
The Fed’s hawkish stance is a direct response to recent inflation data, with the August 2025 CPI report showing core inflation remaining stubbornly high at 3.4%. This has pushed the US 10-year Treasury yield back up to 4.5%, underpinning the dollar’s strength. In contrast, the European Central Bank is dealing with a stagnant economy, as recent German PMI data fell to its lowest level in over a year.
Clear Policy Divergence
This clear policy divergence between a firm Fed and a hesitant ECB suggests the path of least resistance for EUR/USD is lower. We saw a similar pattern throughout 2022 when aggressive Fed rate hikes consistently drove dollar strength against the euro. The current pause near 1.1750 could be a valuable opportunity to position for a potential break lower.
For traders, this suggests that the current calm is a time to prepare for future volatility. Buying put options with strike prices below 1.1700 for the coming weeks could be a calculated way to profit from a move downwards once today’s option expiries are cleared. The constrained price action may be keeping implied volatility relatively low, making such positions more affordable.
Alternatively, selling call options or implementing bear call spreads with a ceiling around the 1.1850 level could also be a prudent strategy. This approach is based on the view that the strong resistance and fundamental headwinds will cap any significant rallies. The goal is to collect premium while waiting for the larger downward trend, driven by interest rate differentials, to reassert itself.
