Insights 
VT 
On 1 August, there is a single notable FX option expiry to observe. This relates to EUR/USD at the 1.1460 level.
This option expiry does not align strongly with any technical markers, suggesting a limited effect on market movements. Nonetheless, it may help contain price actions, as the current trend favours sellers.
Key Focus Moving Averages
The key focus remains on the 100-day moving average, positioned at 1.1361. Attention is also drawn to the impending US jobs report.
With the EUR/USD option expiry at 1.1460 acting as a potential cap for today, we see it reinforcing the current downward pressure on the pair. This level isn’t a major technical barrier, so our focus shifts to the more significant market driver, the US jobs report due later today. The market is positioned for sellers to maintain control, especially if the data points to a resilient US economy.
The bearish sentiment is rooted in the diverging policies of the central banks. We’ve seen recent US Core PCE data hold firm around 2.7%, keeping the Federal Reserve cautious, while Eurozone HICP inflation cooled to 2.1% in the latest reading. This fundamental difference supports a stronger dollar, making it difficult for the euro to gain any lasting traction.
Our immediate attention is on the 100-day moving average at 1.1361, which is the key support level we are watching. A decisive break below this, particularly following a strong US jobs number, would signal further downside. Consequently, we are looking at buying put options with strikes around 1.1300 or 1.1250 for late August expiration to position for a potential slide.
Market Impact of Policy Divergence
Looking back at the sharp moves during the Fed’s hiking cycle in 2022 and 2023 reminds us how quickly policy divergence can impact currencies. While the current environment is less aggressive, the theme is familiar, and we have seen one-month implied volatility for EUR/USD rise from 6.5% to 7.2% over the past few weeks. This shows the market is increasingly pricing in a bigger move.
In the coming weeks, we should look beyond today’s events and consider strategies that profit from this sustained downward pressure. Selling out-of-the-money call spreads, perhaps with strikes above the 1.1500 psychological level, could be a prudent way to collect premium. This approach benefits from both a drop in the pair and time decay, aligning well with the current market view.
