FX Options Insight 10/09/24
As a result of the mixed U.S. jobs data released on Friday, FX volatility risk premiums were priced out, resulting in a decline in implied volatility. Consequently, FX has remained within its usual ranges. Nevertheless, the potential for even more substantial declines is being restricted by Wednesday's U.S. CPI data and a plethora of significant G10 central bank policy announcements.
The televised debate between U.S. presidential candidates Kamala Harris and Donald Trump on Tuesday and the U.S. CPI data on Wednesday are now available as overnight expiry options. Nevertheless, the minimal FX reaction to either event is indicated by the limited implied volatility increase in these options.
Large FX option strike expiries between 1.1000 and 1.1100 may continue to restrict EUR/USD volatility until the Sept. 18 U.S. Federal Reserve policy announcement if the European Central Bank decision on Thursday fails to generate excitement.
Traders are still believed to be long JPY through spot and options, with 140.00 barriers remaining a critical USD/JPY target. The JPY call/USD put premium remains robust, despite the fact that risk reversals have declined from their recent highs.
The price action of the GBP/USD pair indicates that the market is cautious of spot setbacks and has limited upside potential. Sub-month risk reversals have returned in favor of GBP puts.
AUD/USD In comparison to 1-month historic volatility at 9.8, 1-month implied volatility is situated in the midst of a 9.0/10.0 range and has the potential to provide significant value.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!