EUR/USD has recovered from Friday's 1.1132 low and is retesting 1.1200. That puts a thick band of option strikes between 1.1200 and 1.1250 in focus.

Why the zone matters As an option expiry approaches (10 a.m. New York (1500 GMT) for G10 pairs), hedging flows typically increase. The relationship between spot and strike becomes more important to option profit and loss. If an option is likely to be exercised, the opposing party may need to buy or sell more of the underlying currency to meet its obligation. When strikes are near spot, these flows can often pull spot towards them and help contain price action until expiry. The more strikes in one area, the stronger this effect can be.

Today About €1.7 billion expires at 1.1190, just below the retest level. It is one of Monday's largest strikes and with spot nearby, hedging flows might keep the price anchored in the immediate area until the 10 a.m. New York cut.

The bigger concentration starts tomorrow Excluding Monday, about €19.8 billion of strikes fall in the 1.1200-50 zone from Tuesday to Friday. That compares with about €14.0 billion across 1.1100-1.1190 and about €9.9 billion across 1.1260-1.1340. The 1.1200-50 zone has the largest expiries on three of the four days, and the densest strikes per level over the week.

The weight within that 1.1200-50 zone builds through the week:

• Tuesday: about €4.2 billion.

• Wednesday: the heaviest day, at about €7.0 billion.

• Thursday: about €5.7 billion.

• Friday: about €2.9 billion.

Over the week, 1.1250 is the largest single strike in the zone at about €5.4 billion, followed by 1.1210 at about €3.5 billion.

What it means for the recovery Rallies into the 1.1200-50 zone may stall and dips can find support, which makes it harder for EUR/USD to build momentum through the area before the expiries roll off.

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