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Big FX option expiries in play after the payrolls report

Erik September 4th, 2020

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SUMMARY

  • Key EURUSD strikes include 3.2BLN at 1.1800 and 3.9BLN at 1.1900.
  • USDJPY to see 2.4BLN in option expiries 106.00-25 and 3.6BLN 106.50-75.
  • US Non-Farm Payrolls expectations: +1.4mln jobs and 9.8% unemployment
  • Canadian Employment expectations: +275k jobs and 10.1% unemployment.
  • BOE’s Saunders provides some dovish fodder for the sterling bears.
  • US and Canadian markets closed on Monday for the Labour Day holiday.


ANALYSIS

USDCAD

Dollar/CAD is marking time this morning ahead of the US and Canadian employment reports at 8:30amET, but from a technically weaker point of view. Yesterday’s -3.5% rout in the S&Ps helped the market get above 1.3110s resistance, but just a modest 0.2% bounce for equity futures in Europe this morning has now seen USDCAD give up this level. Traders are expecting 1.4M jobs gained in the US for the month of August with 9.8% unemployment, and +275k for Canada with 10.1% unemployed. Stay tuned @EBCTradeDesk on Twitter for full coverage.
 

USDCAD DAILY

USDCADD_9.4

 

USDCAD HOURLY

USDCADH_9.4

OCT CRUDE OIL DAILY

OCTCRUDEOILD_9.4


EURUSD

Euro/dollar hung in amazingly well yesterday despite the sharp selloff we saw in the US stock market; so much so that it had remembering late February’s euro strength in the midst of equity risk-off flows…which at the time many analysts attributed to the currency’s funding status (negative yield). We didn’t want to read too much into this as a new macro theme though because yesterday’s stock market selloff felt like the inevitable correction of Nasdaq-specific exuberance and we could have very well had pre-NFP, option-related hedging flows in play as well. Today’s huge 1.1800 and 1.1900 option expiries have grown to 3.2BLN and 3.9BLN in size respectively, which could make for a volatile and non-directional bias heading into the Labour Day long weekend.
 

EURUSD DAILY

EURUSDD_9.4

EURUSD HOURLY

EURUSDH_9.4

SPOT GOLD DAILY

SPOTGOLDD_9.4


GBPUSD

The Bank of England’s Michael Saunders provided some dovish fodder for the sterling bears this morning when he said that it is quite likely that additional easing will be appropriate and that he is not theoretically opposed to negative rates. His comments shouldn’t be all that surprising considering Saunders one of the most dovish members on the MPC, but he started speaking during the 5amET hour and GBP has been under-performing against the USD and the EUR ever since. We think 1.3250-1.3320 will be the pivotal range for GBPUSD heading into the weekend, and the market will get more directional with a break.
 

GBPUSD DAILY

GBPUSDD_9.4

GBPUSD HOURLY

GBPUSDH_9.4

EURGBP DAILY

EURGBPD_9.4

AUDUSD

The risk-sensitive Aussie lost the 0.7280s support level during yesterday’s S&P selloff and it’s having a hard time regaining it this morning as the equity futures struggle to hold a bounce from early European trade. There’s a 600M 0.7200 option expiry at 10amET, that could prove magnetic if the US NFP report brings about some broad USD buying.


AUDUSD DAILY

AUDUSDD_9.4

AUDUSD HOURLY

AUDUSDH_9.4

USDCNH DAILY

USDCNHD_9.4


USDJPY

A boat-load of dollar/yen options will be rolling off after this morning’s NFP report (2.4BLN 106.00-25 and 3.6BLN 106.50-75), which like EURUSD’s setup today, could make for a volatile/non-directional close to the week. The bulls have the upper hand for the moment, by virtue of them bouncing USDJPY off 106.00 trend-line support overnight. 
 

USDJPY DAILY

USDJPYD_9.4


USDJPY HOURLY

USDJPYH_9.4


US 10YR BOND YIELD DAILY

US10YRBONDYIELDD_9.4

Charts: Reuters Eikon


About the Author

Erik Bregar Director, Head of FX Strategy at Exchange Bank of Canada

Erik Bregar - Director, Head of FX Strategy

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Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

Interested in creating a custom foreign exchange trading plan? Contact us or call CXI's trading desk directly at 1-833-572-8933.

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