Aside from its psychological significance, EUR/USD 1.20 is a major level in the options market, containing a wealth of barriers and triggers, which if breached could open the door to more gains.
Option traders typically attach barriers and triggers to certain levels as outright binary bets that pay out fixed amounts if touched/untouched by expiry, or to cheapen simple vanilla options by bringing them in to play, or knocking them out, when the trigger is touched.
The amount of these options around 1.20 is allegedly huge.
DTCC data shows the amount of existing vanilla options above 1.20 is minimal compared with those below.
EUR/USD's rapid rise hasn't given players time to build inventory.
Vanilla options are typically hedged with cash to limit exposure, which can help to contain FX volatility when impending maturities are large, but that lack of topside coverage suggests this will be limited, potentially fuelling a rise if defence of 1.20 is eventually broken.
For now however, option market price action doesn't perceive a 1.20 breach as an immediate threat nL1N2FF08Q .
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