FX option expiries on 12 August feature notable levels in EUR/USD and USD/CAD. EUR/USD has an expiry at the 1.1650 level, which is not linked to any technical markers, potentially leading to minimal impact. Traders are awaiting the US CPI report before making major moves.
Similarly, USD/CAD has an expiry at 1.3750, with the 100-hour moving average close at 1.3754. This situation may lead to decreased trading activity until inflation data is released. A quieter currency market is expected until the US inflation report is available.
Impact Of Today’s Option Expiries
Once the data is out, the focus will shift to its implications for the Fed’s future actions.
Today, August 12th, 2025, we see some large option expiries, including for EUR/USD at 1.1650 and USD/CAD at 1.3750. While these levels may provide some temporary gravity, they are not the main event for the market. The real focus for everyone is squarely on the US CPI inflation report due out later today.
The market is holding its breath as we wait for the numbers, with consensus forecasts for July’s year-over-year inflation to come in at 3.1%. This would be a slight moderation from the 3.3% we saw in June, but it remains stubbornly above the Fed’s target. With the Fed funds rate holding at 5.50%, any upside surprise would likely eliminate any remaining hopes for a rate cut in 2025.
Strategies For Derivative Traders
For derivative traders, this means volatility is the name of the game in the immediate term. Implied volatility on short-dated dollar options has already climbed, and a strategy of buying a straddle or strangle could pay off if the CPI number deviates significantly from expectations. This allows one to profit from a large price move in either direction without having to guess the outcome.
If the inflation number comes in hot, say above 3.3%, we should expect a sharp rally in the US dollar. In this scenario, positioning for the coming weeks would involve buying USD calls or selling puts against currencies with weaker central bank outlooks, like the euro. The recent German ZEW Economic Sentiment survey, which came in at a disappointing -15.2, shows the Eurozone economy is still fragile.
Conversely, a downside surprise in CPI, perhaps below 3.0%, would ignite hopes of a Fed pivot and trigger a significant dollar sell-off. This would be a signal to look at buying calls on pairs like EUR/USD or AUD/USD for the next few weeks. We could also consider buying puts on USD/CAD, especially after Canada’s recent jobs report showed a surprise gain of 45,000 jobs, strengthening the loonie.
Looking back, we all remember the sharp, sustained trends that followed the major inflation surprises of 2022 and 2023. Today’s data could be the catalyst that sets the primary market direction for the rest of this quarter. A strong print would confirm the “higher for longer” narrative and likely keep the dollar on an upward trajectory.
