There are two notable FX option expiries to consider. Both options involve EUR/USD at the levels of 1.1700 and 1.1750, with the current price situated between these two points.
The pair encounters resistance on the daily chart around the 1.1730-40 range, which impeded its upward move after the US jobs report. The expiries might maintain control unless there is an extended weakness in the dollar.
Start of the Week Caution
Indecision in Wall Street last week contributes to a cautious beginning this week. US stocks initially responded positively to softer labour market data but ended lower, though slightly supported by late bids.
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Looking back, we can see how large option expiries, like those around the 1.1700 level in previous years, often contain price action. Today, we are seeing a similar dynamic with significant open interest in EUR/USD at 1.0900 and the psychological 1.1000 strike for this week’s cut. The current spot price is hovering just above 1.0950, caught between these two powerful magnets.
This indecision comes after last Friday’s August 2025 US jobs report, which showed a softer headline payroll number but surprisingly strong wage growth. This mixed data has fueled uncertainty about the Federal Reserve’s next move, preventing a clear trend from emerging in the US dollar. As a result, the market seems content to trade within a tight range for now.
The focus is now shifting to next week’s US Consumer Price Index (CPI) report for August, which will be critical for a market still wary of inflation. The latest official data from July 2025 showed core inflation holding at a stubborn 3.1% year-over-year, keeping pressure on the Fed to maintain its restrictive stance. The ECB, meanwhile, is signaling a more dovish tone as Eurozone manufacturing PMIs for August recently fell to a new two-year low of 45.2.
Anticipating the CPI Report
For the next few days, the pinning effect from the options market suggests selling volatility could be a viable strategy. Traders might consider short-dated iron condors or strangles centered around the 1.0950 level to capitalize on the expected range-bound movement ahead of the CPI data. This approach aims to collect premium as time decay erodes the value of these options.
Looking further into the coming weeks, the CPI release is a major catalyst that could break the current calm. A higher-than-expected inflation number could trigger a sharp move lower in EUR/USD, potentially breaking the 1.0900 support level. To prepare for this, traders could look at buying longer-dated puts or establishing bearish put spreads to position for a potential downside breakout.
