EUR/USD lacks any real volatility within a 1.1700-1.1800 range for now, not helped by multi-billion FX option positions and their related hedging flows.
Those exposed to FX options are usually trading volatility, so don't necessarily care about spot direction.
They will hold an opposing view to their option strike risk in the cash market, to limit their exposure.
As those strikes near maturity, this cash hedging can intensify, increasing the amount of EUR/USD being traded above and below the strikes, strangling volatility and limiting overall ranges.
Obviously, the bigger the option strike, the more cash hedging it's likely to need, and DTCC reported option data shows 2 billion euros of strikes between 1.1735-50 expiring at Thursday's 10 a.m.
New York cut, with 638 million euros at 1.1800.
Friday's strike are even bigger -- 2 billion euros between 1.1725-50, 2.5 billion euros between 1.1775-1.1800 and another 2 billion euros up to 1.1850.
Next week sees a further 4 billion EUR/USD option expiries at 1.1800.
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