There are a couple of key expiry levels to take note of on the day, as highlighted in bold below.
The first is for EUR/USD at the 1.1400 level, with the spot price sitting just below the strike and within a 20 pips range currently. The currency pair has been tracking lower all through the week, with the dollar finding strong bids especially as 10-year Treasury yields break the 5% mark to race to 5.11% – its highest since 2007.
But if price action continues to stick around here in the session ahead, that could see the 1.1400 level act as a short-term magnet and contribute to stickier price action in the heading into the cut.
A clean move away from the 1.1400 level would naturally reduce the influence of the expiries. And at this point, any further selloff in the bond market could easily be the trigger for that as it would underpin the dollar again in trading today.
Then, there is one for USD/JPY at the 157.50 level. It sits a bit of a distance away, so the the expiries may not be too impactful for trading conditions in the session ahead.
As mentioned, dollar sentiment remains the bigger driver at the moment with USD/JPY also facing a sterner technical test from the 200-day moving average at 158.43. So, that will be the more important level to watch on any upside price extensions.
The only way the expiries above may become relevant is if there is a pullback to the dollar gains from yesterday. If so, it might just play a bit-part role in limiting any downside price extensions.
And finally, there is one for USD/CAD at the 1.4100 level. This is a sizable one and sits almost directly on the spot price. The combination of size and proximity raises the potential for sticky, two-way price action around 1.4100 ahead of the cut.
That unless we see a stronger catalyst help to push price action away and as highlighted above, it will likely come from any extension to the bond market selling from yesterday.
For more information on how to use this data, you may refer to this post here and/or refer to the Q&A below.
