Strong Euro Momentum Meets Expiry Hurdles: What To Watch In FX Markets

The euro has been gaining significant bullish momentum, pushing EUR/USD higher in recent sessions. However, FX option expiries set for 6 March at the 10 AM New York cut could introduce resistance at key levels. Traders are closely watching the 1.0845-50 region, where a concentration of option expiries may influence short-term price action.

Despite this potential hurdle, EUR/USD has already tested waters above 1.0800 and is attempting to break past the 61.8% Fibonacci retracement level at 1.0817. The question now is whether the option expiries will cap the rally or if broader bullish sentiment will override their influence, allowing the pair to continue its march toward the 1.1000 target.

Key FX Option Expiries and Their Potential Impact

FX option expiries often act as magnet points for price action, particularly when trading volumes align with these key levels. On 6 March, the notable expiries at the 1.0845-50 range could create a temporary cap on EUR/USD’s upside. When a significant amount of options expire at a specific price, market makers and large traders tend to adjust their positions, leading to consolidation or rejection at those levels.

While this doesn't guarantee that EUR/USD will be unable to break higher, it does add a layer of technical resistance that traders should consider when planning their moves for the day ahead.

Technical Factors Supporting Bullish Momentum

The bullish case for EUR/USD remains strong from a technical perspective.

• Breaking Above 1.0800: The pair has already surpassed this psychological level, reinforcing the uptrend.
• Key Resistance at 1.0817: The 61.8% Fibonacci retracement of the recent downtrend sits at this level. A decisive break above could clear the way for further gains.
• Larger Target at 1.1000: In the bigger picture, buyers are aiming for the 1.1000 handle, a round-number resistance level that could serve as a key milestone in the euro’s recovery.

These technical levels suggest that while option expiries may act as temporary resistance, the broader trend remains favorable for euro bulls.

Factors That Could Override the Expiry Influence

Although FX option expiries can impact short-term price action, there are several reasons why EUR/USD may continue higher despite them:

• Market Expectations for the ECB: With the European Central Bank (ECB) decision looming, traders are positioning for potential policy shifts. If the ECB maintains a hawkish tone or signals economic resilience, the euro could see additional demand.
• Broad Risk Sentiment: If global markets lean risk-on, the dollar could weaken, giving further support to EUR/USD.
• Momentum and Technical Breakouts: If buying pressure is strong enough, it could push through expiry levels, forcing traders to adjust their positions and accelerating the upside move.

Trading Considerations for the Session Ahead

For traders navigating the session, key considerations include:

• Watching price action around 1.0845-50: If the pair struggles to break past this region, it may indicate that expiries are influencing market behavior.
• Breakout Potential: If EUR/USD decisively clears 1.0845-50, the path toward 1.0900 and beyond could open up.
• European Session Influence: As European traders step in, the increased volume could either reinforce the upside momentum or lead to consolidation if expiries hold the price in check.

Conclusion

EUR/USD remains in a strong uptrend, but FX option expiries at 1.0845-50 introduce a potential resistance zone. While these expiries could momentarily cap gains, the broader technical setup and fundamental factors suggest that bullish momentum may eventually prevail. Traders should remain mindful of these expiry levels while also considering the bigger picture, including upcoming ECB developments and overall market sentiment. Whether EUR/USD respects the expiries or pushes past them will be a key narrative in the session ahead.

Author: Ricardo Goulart