On 16 September, FX option expiries focus on EUR/USD, specifically between the 1.1750 to 1.1800 levels. A large zone of expiries could influence price action, keeping it below the 1.1800 mark as US retail sales data is anticipated later in the day.
Rate Cut Expectations
Market expectations predict a 25 basis points rate cut by the Fed, which may limit upward movement past the 1.1800 level. The expiries thus contribute to this scenario, aligning with current market sentiments until any dovish communication is confirmed by the central bank.
We are seeing significant EUR/USD option expiries set for the 10am New York cut, focused heavily around the 1.1750 to 1.1800 range. This large positioning is likely to keep the pair anchored just under 1.1800 for the session. The market seems content to absorb this flow before reacting to major data later today.
The major event on the horizon is the Federal Reserve’s meeting tomorrow, with markets having priced in a 90% chance of a 25 basis point rate cut. This follows last month’s soft non-farm payrolls report, which showed job growth of only 95,000, and a core CPI reading that fell to an annualized 2.3%. Traders are therefore hesitant to push the dollar higher before confirming the Fed’s dovish message.
This situation contrasts with the European Central Bank, which has signaled it will hold rates steady as last week’s flash PMI data for the Eurozone beat expectations. Looking back to the aggressive, synchronized rate hikes we saw across the globe in 2022, this growing policy divergence is now a key theme. This backdrop suggests underlying strength for the euro against the dollar once these expiries are cleared.
Trading Strategies
For now, selling short-dated call options with a strike price just above 1.1800 could be considered to capitalize on the price being pinned down. Looking ahead, if the Fed confirms its dovish turn tomorrow as expected, traders may look to position for a move higher. Buying longer-dated call spreads targeting the 1.1900-1.2000 area for October could be a way to play a potential breakout.
