• FX option risk reversal contracts are an FX volatility strategy, but their pricing reveals directional sentiment

• Price action in risk reversals shows the FX direction expected to increase volatility - often the most vulnerable side

• Benchmark 1-month 25 delta EUR/USD risk reversals went from a neutral bias to 0.25 EUR puts over calls since Friday

• Hawkish Warsh comments at Jackson Hole are driving this shift in EUR/USD risk premium from upside to downside

• Recall, 1-month risk reversals flipped from downside to topside strikes in mid August for the first time since February

• Building on this fresh downside skew would confirm bearish momentum is regaining control of EUR/USD sentiment

• Related - Finding value in FX options for NFP, CPI and the Fed

• Related - EUR/USD boxed in by techs and huge option hedging before NFP
EUR/USD 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)

• EUR/USD recovers 1.1625 Tuesday since the post US Fed chair Warsh inspired drop from 1.1660-1.1578 Friday

• The 100-dma at 1.1570 underpins, while the 200-dma at 1.1634 adds resistance to the current range

• Big FX option expiries and related hedging flows help contain FX as London returns from a bank holiday weekend

• €4.2 billion strikes between 1.1580-1.1600 and €1.5 billion 1.1625-35 expire at 10-am New York/14.00 GMT Tuesday

• More 1.1600 strikes expire all week, with hedging likely to contain EUR/USD in the absence of any fresh catalysts

• Market may stay sidelined into Friday's US jobs data, leaving FX option hedging flows dominant near term
EUR/USD daily chart (EBS)

EUR/USD FX option strikes expiring between September 1-4 Click here

(Richard Pace is a Reuters market analyst. The views expressed are his own)

• USD/JPY has seen a 159.64-159.98 range, on Tuesday, according to EBS data

• Yen lingers near 160 as U.S. Treasury Secretary Bessent leans on BOJ

• Bessent expects Japan to take action to boost yen, signals BOJ rate-hike chance

• Bullish as trading remains above 159.60 Fibo, 50% retrace of 163.99-155.20 intervention fueled drop

• There is scope for bigger gains to 160.63 Fibo, a 61.8% retrace of the same fall

• Fin Min Katayama: Japan, US confirmed policy behind joint yen action to achieve "orderly" moves

• USD/JPY and EUR/JPY tend to move in tandem, log correlations are high above +0.5

Daily Chart


Correlation Chart

(Martin Miller is a Reuters market analyst. The views expressed are his own)

• FX option strikes expire at 10am New York/14:00 GMT on Tuesday September 1

• EUR/USD: 1.1540-50 (1.6BLN), 1.1580-90 (1.9BLN), 1.1600 (2.3BLN), 1.1625-35 (1.5BLN), 1.1650 (2.1BLN)

• USD/CHF: 0.8060 (220M), 0.8100 (606M), 0.8170 (580M)

• GBP/USD: 1.3550 (603M). EUR/GBP: 0.8525-30 (537M)

• AUD/USD: 0.7100-10 (1.1BLN), 0.7125 (369M), 0.7155 (488M)

• NZD/USD: 0.5850-65 (245M), 0.5940-50 (233M), 0.5975 (210M)

• AUD/NZD: 1.1995 (337M), 1.2100 (250M)

• USD/CAD: 1.3855-60 (455M), 1.3920 (451M)

• USD/JPY: 159.45-50 (605M), 159.68 (626M), 160.00 (440M), 161.00 (595M)

• AUD/JPY: 114.35 (423M). EUR/JPY: 183.83 (420M)(Richard Pace is a Reuters market analyst. The views expressed are his own)

• GBP/USD consolidates in a narrow range with UK markets closed Monday

• Holds near Fri's 2-week low hit after Warsh's hawkish Jackson Hole speech

• Rising Fed rate hike bets cap GBP; odds of Sep 16 hike at 66% from 35% Fri

• U.S. payrolls this Friday, inflation data next week key for direction

• UK retailers raise prices by most since 2024, BRC data shows

• Support 1.3525-30, 1.3500,1.3475-80; resistance 1.3570-75, 1.3600-05

• Monday range 1.3531-1.3565, Asia 1.3543-1.3568
GBP:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• EUR/USD rallied to 1.1620 EBS yesterday, Asia to 1.1624 before off to 1.1607

• Holding for now between 100-DMA at 1.1569 and 200-DMA above at 1.1634

• Also holding in 1.1601-18 hourly Ichimoku cloud, descending 100-HMA 1.1632

• Option expiries today to again help contain spot action

• Between 1.1500-95 E5.4 bln, at 1.1600 E2.3 bln, 1.1625 to 1.1700 E5.2 bln

• EUR/JPY 185.46-62 EBS, at top of 184.92-185.47 daily Ichimoku cloud

• Below 185.62 100-HMA, 185.66-70 hourly Ichimoku cloud, above 185.15 200-HMA

• EUR/GBP indicated 0.8574, in 0.8536-92 tapering daily Ichimoku cloud

• Sideways action may see break above cloud, also above 0.8571-74 hourly cloud

• Option expiries today E804 bln between 0.8500-60, smattering 0.8575-0.8650

• EUR/CHF well bid again Asia 0.9390-96 EBS, towards 0.9409 peak August 14

• Seems CHF-funded carries being put back on after recent dips

• Related comments , also , for more click on [FXBUZ]

EUR/USD:


EUR/USD nearby option expiries this week:


EUR/CHF:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• AUD/USD -0.2% from Tue morning's 0.71805 high as oil prices continue to rise

• AU Q2 current account -27.2 bln (poll -30.0), Jul building approvals -3.6%

• Renewed U.S.-Iran hostility driving energy prices higher, Brent crude +0.6%

• AUD needs 0.7210 break to resume uptrend, below 0.7100 would encourage bears

• AU Q2 real GDP due Wed, Reuters poll consensus +0.3% q/q, +1.8% y/y

• RBA's Sarah Hunter & Dr James Bishop appear before Senate Committee Thur

• U.S. Aug non-farm payrolls due Fri, Reuters poll consensus +55k

• Range Asia 0.7164-805 support 0.6920 0.6866, resistance 0.7210 0.7277-82
AUD Daily 21/55/100-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• Shares of Australia's West Coast Silver fall as much as 13% to A$0.100, marking their biggest intraday pct loss since June 10

• Stock was on trading halt since August 28

• Shares hit their lowest level since August 17

• Diversified miner announces A$6 million ($4.31 million) placement at A$0.095 per share, a 17.4% discount to stock's last close

• Says proceeds will be used for exploration and development drilling at Elizabeth Hill South and West project in Western Australia, among others

• Nearly 2.4 mln shares change hands, about 2.5x the 30-day average

• YTD, stock down 51.1%, including session's moves

($1 = 1.3933 Australian dollars)

(Reporting by Subhalakshmi Dey in Bengaluru)

• USD/JPY looks to be on hold again below recent highs, Asia 159.72-84 EBS

• Holding for now in 159.65-92 hourly Ichimoku cloud, 100-HMA 159.52 below

• Cloud to begin to taper during course of global day, break below? Above?

• 100-DMA 160.01 above, daily Ichimoku cloud too between 161.29-162.61

• JGB-US Treasury 2-year rate differentials wider overnight, @258 bps

• Differential in 10s still narrow at around 177 bps

• Option expiries look to help contain USD/JPY spot, massive both sides

• Below between 159.00-75 total $2.4 bln, above between 160.00-25 $1.1 bln

• Japanese exporter sales to continue to help cap, absorb importer demand

• Month-end flows also seemed to favour JPY buy-backs, helped cap upside

• Word from US TsySec Bessent, Japan FinMin Katayama meeting eyed

• Bessent earlier said he expects Japan to take action to boost yen

• Related comments , , also

• US markets , , ,

• On Bessent-speak , for more click on [FXBUZ]

USD/JPY daily:


USD/JPY hourly:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• AUD/USD +0.2% from Mon 0.71515 low despite flaring U.S.-Iran hostilities

• Brent crude +3.0% to $90.75 a barrel, DXY down 0.3%, 30Y UST yields +4 bps

• AUD needs 0.7210 break to resume uptrend, below 0.7100 would swing narrative

• AUD Q2 current account due Tue, Q2 real GDP due Wed (poll +0.3% q/q)

• RBA's Sarah Hunter & Dr James Bishop appear before Senate Committee Thur

• U.S. Aug non-farm payrolls due Fri, Reuters poll consensus +55k

• Overnight range 0.71555-70 support 0.6920 0.6866, resistance 0.7210 0.7282
AUD Daily 21/100/200-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

Credit Agricole CIB Research previews the US August jobs report due on Friday.

"The jobs report was much softer than expected in July, though we expect some rebound in August. Specifically, we tentatively look for NFP to rise by +65k following the -23k decline in July, not as strong as in the spring but still bouncing back somewhat," CACIB notes.

"We expect the unemployment rate to edge back up to 4.2% from 4.1% last month, as we see the possibility for some payback in participation after the dip over the past two months, which could add some upward pressure. For average hourly earnings, we look for a firmer MoM print of 0.3%, though the YoY would still edge down to 3.1% from 3.2%," CACIB adds.

The euro rose against a broadly weaker dollar on Monday, supported by short-covering after Friday's outsized decline, month-end flows, softness in U.S. equities, and expectations that the European Central Bank will raise interest rates next week.

Treasury Secretary Scott Bessent believes the Japanese government and BOJ will take steps to strengthen the yen and hinted at information not yet reflected in markets.

Bessent also said he will meet Canada's finance minister at the G20 and said he had a "very robust" meeting with China's central bank governor, Pan Gongsheng.

Federal Reserve Chairman Kevin Warsh said a global investment surge is replacing the savings glut, supporting growth and capital spending.

Vice President JD Vance said Trump's social media post on Kharg Island was intended as a message to Iran, after President Donald Trump vowed further strikes.

German inflation accelerated less than expected in August to 2.9% year-on-year, preliminary data from the federal statistics office showed on Monday.

DXY is pulling back after Friday's dollar surge stalled at the 100-DMA near 99.70, with reversal signals suggesting fading momentum but little conviction toward either a bullish or bearish directional bias.

EUR/USD firmed on month-end dollar selling and short-covering, but lower highs, large 1.16-1.7 expiries this week and resistance at the 200-DMA of 1.1633 keep the outlook cautious, unless it clears the 1.1710-11 August double top.

GBP/USD held a modest gain above its 21-DMA of 1.3540, despite rising U.S. yields, with a break above the day's high of 1.3565 potentially targeting 1.36 ahead of the key U.S. payrolls on Friday.

AUD/USD edged up as stronger commodity prices and expectations for further RBA tightening offset rising U.S. yields, with a break above 0.7170 strengthening a bullish case.

USD/JPY remained capped below 160 as softer dollar sentiment and intervention concerns offset support from higher Treasury yields and oil, though the bias stays constructive above 159.

Treasury yields rose as much as 4 basis points as the curve steepened. The 2s-10s curve was up about 3 basis points to +40.2bp.

The S&P 500 fell 0.45%.

WTI oil rose 2.8% amid rising US-Iran tensions.

Gold fell 0.5% while copper gained 0.2%.

Heading toward the close: EUR/USD +0.28%, USD/JPY -0.13%, GBP/USD +0.06%, AUD/USD +0.10%, DXY -0.28%, EUR/JPY +0.10%, GBP/JPY -0.09%, AUD/JPY -0.14%.(Editing by Burton Frierson Robert Fullem is a Reuters market analyst. The views expressed are his own)

• GBP$ up a touch NY afternoon trade, +0.08% at 1.3549; NorAm range 1.3565-1.3540

• Long-end UST yields lead higher hold little sway over GBP$ in either direction

• LSEG's WS indicating UK 10-yr gilts on the rise, may have fiscal implications going forward

• IRPR- BoE on hold in Sept, +27bp by Dec MPC meet; Fed 64% odds for Sept hike, +37bp by Dec

• End-of summer liquidity light into month-end; US payrolls Sept 4, mid-Sept US, UK CPI in focus

• GBP$ supt 1.3530 Friday/Monday low area, 1.3488 rising 30-DMA, 1.3440 200-DMA

• Res 1.3564 Monday high, 1.3598 the 10-DMA, 1.3648 daily high Aug 26

GBP$ Chart:

(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

Morgan Stanley Research discusses its Fed rate outlook after Fed Warsh's remarks at Jackson Hole.

"Our economists expect that the data releases between now and the September FOMC meeting will meet the bar that Chairman Warsh laid out: that underlying inflation is moving to the Fed's 2% objective, clearly and at sufficient speed. As a result, we don't think the Fed will hike rates in September, which should lower front-end US yields relative to yields abroad since roughly +15bp are currently priced for the September FOMC meeting," MS notes.

"Therefore, we think the USD can decline broadly in line with front-end US yields, given the broad relationship between the USD and front-end yield differentials so far this year," MS adds.

USD/JPY remains pinned below 160 after U.S. Treasury Secretary Scott Bessent said he expects Japanese government and Bank of Japan policies to support a stronger yen, adding that he is aware of information not yet reflected in markets.

Markets are likely to expect this to mean the Takaichi administration's pro-growth agenda and higher BOJ rates, though a stronger yen may be difficult to achieve given the BOJ's slow normalization pace and growth that has largely accompanied yen weakness.

Bessent's comments may hint at the timing of intervention or other measures that could help keep USD/JPY near or below the key 160 level and prevent a return toward 164. Markets are also awaiting comments from Japanese officials at the G20.

There remains optimism that long-yen positions will eventually be rewarded as investors anticipate a faster BOJ tightening cycle and government policies that support a recovery in the undervalued currency. Options markets are less convinced, suggesting any yen recovery is more likely against the euro than the dollar if U.S. inflation remains elevated. Focus is squarely on next week's CPI report and mid-September policy meetings.

To shift momentum decisively in favor of USD/JPY bears, the pair would need to close below its 21-day moving average at 158.95 and 200-day moving average at 158.43. A break below a rising channel from the post-intervention low at 155.20 opens the door for further losses. By contrast, a close an upper Bollinger at 160.34 helps build the bull case.
Yen

(Robert Fullem is a Reuters market analyst. The views expressed are his own)

ANZ Research previews this week's September RBNZ policy meeting.

"We expect the RBNZ to deliver a 25bp hike at its meeting this week, taking the OCR rate to 2.75%. OIS markets have assigned above a 90% chance of a hike next week, so the key takeaway from the MPS will be expectations of the timing and extent of future tightening. Markets are only pricing in around a 50% probability of a hike in October. A hawkish surprise will likely firm up October pricing, which we think will only provide limited upside to the NZD, considering it would be bringing forward some the hike fully priced by OIS for the December meeting," ANZ notes.

"On the OCR track, we expect a similar track to that published in May would leave optionality open around the October meeting and have little impact on FX. In May, the RBNZ’s OCR track peaked at 3.28% in Q2 2029 and implied an average OCR of 3.1% over the two years ending Q3 2028. OIS are reflecting a rate of around 3.5% in August next year, which we think is stretched. Any indication of a softer OCR terminal rate would weigh on the NZD, potentially seeing the NZD approach key support near 0.586–0.587. Upside risks look less pronounced. Overall, we are mildly negative the NZD into the RBNZ meeting,' ANZ adds.

Sterling looks vulnerable to a near-term drift lower as it consolidates below 1.36, with bulls paring recent longs while liquidity thins ahead of end-of-summer holidays and markets adjust to a more hawkish Fed narrative following Chair Kevin Warsh's Jackson Hole debut.

In the immediate term, however, the seasonal dearth of liquidity may cushion sterling, as entrenched shorts trim exposure rather than risk being chopped up in illiquid conditions. GBP/USD shorts have been cut by nearly 20% over the past three weeks, with the pound rallying off late-July lows near 1.3275 as a dovish Fed lean — after the recent rate hold and softer U.S. data — took hold. Those dovish tones have cooled markedly in the run-up to, and after, Warsh's Friday's speech, which was interpreted as hawkish and nudging rate expectations higher, to sterling bulls' detriment.

Beyond the Fed noise, other rate stimuli tilt hawkish. With the U.S.–Iran Memorandum of Understanding an increasingly distant memory, oil's climb from near $60/bbl into the $80s risks prolonging global inflation and stoking second-round effects; weekend U.S.–Iran hostilities have lifted crude further, reinforcing high-for-longer fears. Short-term futures suggest the Fed and BoE stay on parallel paths through 2026. Further out, the post-Warsh rise in the 3-month SOFR strip may stall GBP/USD gains as U.S.–UK rates converge.

With central bankers noting the data will be decisive, markets will be looking ahead to U.S. payroll data on September 4, followed by U.S and UK CPI data on September 11 and 16 respectively for clues to Fed and BoE policy paths heading into year-end.
GBP Chart:

(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Goldman Sachs Research discusses the USD outlook.

"A number of reasons have contributed to the Dollar's tough summer with policy volatility being a common factor. First, small but unusual US interventions in the Yen and Treasury markets have shown a clear revealed preference for supporting other assets, even at the cost of Dollar weakness," GS notes.

Second, beyond that signal, and each individual action, this greater willingness to resort to unconventional choices raises questions about whether other even more extreme choices that come at the expense of the Dollar could be considered, especially if other harder choices on fiscal and monetary tightening are avoided.

And third, the opacity of the Fed reaction function, against a backdrop where inflation data has been a touch more quiescent, has added to near-term pressures on the Dollar," GS adds.

• EUR/USD rebounds at month-end after its worst daily loss in more than two months

• Hawkish Fed repricing after Chair Warsh Friday and higher oil keeps bears in control

• Nearby support seen at the Aug. 19 low of 1.1568 and the 100-DMA at 1.1570

• Large option expiries between 1.1600 and 1.1700 may cap any rebound on Monday

• Techs lean bearish due to series of lower highs and position below the 5-DMA

• A break below 1.1550-60 would expose the 1.1500 level

• Resistance is at 1.1660, ahead of the 1.1710-11 August double top
EUR

(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

• GBP/USD close above 1.3477 to complete back-to-back monthly gains

• Fits with risk of a second monthly loss for the dollar index

• Initial sterling support at 1.3527, Friday's low

• Fibo level at 1.3521, 38.2% of 1.327401.3674

• Fed rate hike bets in the mix following Warsh hawkish undertones

• Some dollar demand as ME tensions flare but market generally tight

• Sterling activity thin with London observing a Monday holiday
GBP/USD daily chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• JPY leads G10 to open the week, Bessent flags recent yen moves as pretty well contained

• Speculation of a G20-side meeting between JP officials and U.S. Treasury Sec Besset adds to yen bid

• USD/JPY back at pre-Warsh levels after stalling above 160

• Upside still looks capped, despite no clear sustained pullback signal

• Warsh's hawkish remarks injects more two-way risk into USD/JPY

• Given the hawkish repricing in U.S. rates, downside U.S. data surprises can hit harder

• Support: 159.17-36 (200-hour MA cluster), then 158.00

• Resistance: 160.20 (weekly high), then 160.81 (July 31 high)
USDJPY hourly chart

Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Thin market with London out: Fed spec and ME tension the drivers

• AUD holding a small bid despite risk jitters: AUD/USD up 0.01% at 0.7159

• Friday's 0.7208 high initial resistance: break needed to keep bull run alive

• Support at the 10-DMA, 0.7149: risk of a return to the 100-DMA, 0.7077

• Warsh comments lift September rate-hike bets but dollar broadly softer Monday

• Fed may need to hike rates if above-target inflation persists

• Markets price in about a 60% chance of a September rate hike

• Trump says Iran's Kharg is being 'blown to smithereens', but gives no details
AUD/USD daily chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• EUR/USD flat in holiday-thinned trade, firmer oil adds to euro headwinds

• Oil jumps more than 2% on U.S.-Iran tit-for-tat strikes , keeping EU gas prices near YTD highs

• Through the terms-of-trade channel, rising energy costs increase downside risks for EUR

• Fed Sept hike odds now around 60% , supporting USD bid

• Near-term support at 1.1550-60, break would open up 1.1500

• Resistance at 1.1600-05, then 1.1630-50
EURUSD hourly chart

Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Aug 31 (Reuters) - Foreign exchange option expiries for the New York cut at 10.00 a.m New York (1500 GMT) can, under certain conditions have an impact on currency spot prices.

For Monday's EUR/USD expiries there are strikes totalling EUR10.45 billion between 1.1600 and 1.1690. These deals are likely to impact the spot price.

Gamma hedging is a major driver when traders who are short of options often hedge their exposure in spot. As spot moves closer to key strikes near the expiry time, hedging flows can increase and become one-sided (buying if market is below a big strike, selling if above), which can influence spot.

Market conditions that can heavily influence the impact of option expiries include the following. The notional size of the expiry if large relative to typical market liquidity in that pair and the time of day. Strikes that are near the current spot (at or very near-the-money into the cut), especially if there are several clustered strikes. If dealer positioning is skewed (the street is generally short gamma), so many players need to hedge in the same direction and if liquidity is thinner (e.g., around data, holidays, or in less-liquid currency crosses), so hedging flows have a greater impact.

Spot traders will look for patterns that can appear ahead of option expiries.

Magnet effect: If there's a large expiry, at or very near spot, the price sometimes gravitates toward that strike into the cut as hedgers adjust.

Volatility spike / mean reversion: Short-gamma hedgers may buy high and sell low as spot moves, which can add noise and short-term volatility. Long-gamma players can have the opposite, dampening effect.

Fade after the cut: Once the options expire and hedging flows stop, the market can "relax", and any artificial pressure around a strike may fade.

Option expiries, if strikes are large can impact spot but not always, and usually only when certain conditions are met.

EUR/USD option expiries for Monday's New York cut, August 31
EUR/USD option expiries:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)