|

FX Options: Investors believe in the rebound in EUR/USD and USD/JPY

The EUR/USD rose to a high of 1.1850 on Friday after the US inflation number missed estimates. The daily chart below shows a nice rebound from the trend line support. This is encouraging sign for the bulls and the options data published by the CME shows the investors expect the rebound to continue today. 

EUR/USD EUUU7 Open Interest Change: Current (Aug 11 - Prelim) vs. Aug 10

  • The max OI accumulation is seen in 1.20 Call option, suggesting the level is likely to act as a strong resistance. 
  • The OI accumulation in the Put options is spread mainly over 1.1750 strike, 1.17 strike, 1.1650 strike and 1.16 strike. Higher accumulation is seen in 1.10 Put. 
  • On Friday, max additions were seen in 1.1850 Call, which suggests investors are expecting the rally from the trendline support to continue this week. Call buying was also seen in 1.18 and 1.19 Call, while Call writing was seen at 1.21 strike. 
  • 1.16 Put option added 377 contracts, taking the tally OI to second highest, thus suggesting that a breach of the level to the downside could yield sharp losses. 

View: 

  • Options activity suggests the investors expect a re-test of the recent highs around 1.1910 and possibly breach the same for 1.20 handle.
  • However, the ratio [0.09] of change in the Put OI [+235] to the change in the Call OI [+2390] signal extreme bullish sentiment, if we take into account the overbought nature of the pair following a 1500 pip rally.

USD/JPY - Investors expect bullish reversal confirmation

Friday’s Doji candle [bearish exhaustion] has been followed by a rally to 109.80 levels today. A positive end of the day close today would confirm bullish reversal, i.e. the sell-off from the high of 114.49 [July 11 high] has ended. 

The options data for JPY/USD published by the CME shows the investors do not see the Yen holding strength or have bought downside protection against Yen longs, given the recent rally has been fueled by the geopolitical tensions, which tend to die down quickly. 

On Friday, investors boosted the open interest [OI] in the Put options by 314 contracts. The OI in In-The-Money {IMT} put options improved by 276 contracts. 

Author

Omkar Godbole

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

More from Omkar Godbole
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD eases toward 1.1700 as USD finds fresh demand

EUR/USD eases toward the 1.1700 mark in Europe trading on Friday. The pair faces headwinds from a renewed uptick in the US Dollar as investors look past softer US inflation data. However, the EUR/USD downside appears capped by expectations of the Fed-ECB monetary policy divergence. 

GBP/USD steadies below 1.3400 as traders digest BoE policy update and US inflation data

The GBP/USD pair stalls the previous day's pullback from the vicinity of mid-1.3400s and a nearly two-month high, though it struggles to attract meaningful buyers during the Asian session on Friday. Spot prices currently trade around the 1.3380-1.3385 region, up only 0.05% for the day, amid mixed cues.

Gold stays weak below $4,350 as USD bulls shrug off softer US CPI

Gold holds the previous day's late pullback from the vicinity of the record high and stays in the red below $4,350 in the European session on Friday. The US CPI report released on Thursday pointed to cooling inflationary pressures, but the US Dollar seems resilient amid a fresh bout of short-covering.

Bitcoin, Ethereum and Ripple correction slide as BoJ rate decision weighs on sentiment

Bitcoin, Ethereum, and Ripple are extending their correction phases after losing nearly 3%, 8%, and 10%, respectively, through Friday. The pullback phase is further strengthened as the upcoming Bank of Japan’s rate decision on Friday weighs on risk sentiment, with BTC breaking key support, ETH deepening weekly losses, and XRP sliding to multi-month lows.

Bank of England cuts rates in heavily divided decision

The Bank of England has cut rates to 3.75%, but the decision was more hawkish than expected, leaving market rates higher and sterling slightly stronger. It's a close call whether the Bank cuts again in February or March.

Ethereum Price Forecast: EF outlines ways to solve growing state issues

Ethereum price today: $2,920. The EF noted that Ethereum's growing state could lead to centralization and weaken censorship resistance. The Stateless Consensus team outlined state expiry, state archive and partial statelessness as potential solutions to the growing state load.