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Is There an Options Defense of EURUSD Parity and If So...
Is EURUSD 1.00 an options strike being defended?
Explanations could be stealth intervention or a hidden hand protecting EURUSD from breaching parity. In either case, there is currently a bid around 1.00 so the battle is on. EURUSD is currently back above parity after a brief dip to .9998 on Wednesday following the hot USD CPI report.
Let’s assume the hidden hand is an options defense of parity. How does this impact trading?
I posted this on the Amazing Trader Forum some time again and it explains some of the price action when an options strike us being defended. Replace 1.20 with 1.00….
GVI Forex 20:51 GMT February 3, 2021 Options defense: Reply The seller (writer) of the option will look to defend a strike level from trading, especially if it is a no touch but others as well. Take the current run at EURUSD 1.20, so far successfully defended. The way the seller will defend is to buy EURUSD above 1.20 to try and prevent it trading. If successful and EURUSD bounces it will sell out what it bought so it can reload buying EURUSD to defend 1.20. It will keep repeating buy/sell until either it wins the battle or 1.20 is taken out.
The next catalyst?
Whoever or whatever is defending EURUSD 1.00 faces two obstacles that have the potential to act as catalysts for an eventual breach of this pivotal level
1) Rising speculation (currently 50% odds) that the Fed may consider a 100bp hike at its next meeting
2) Analysis-Euro Is at Parity; Its Fate Is Now With Energy Markets
The following is a EURUSD daily chart provided by The Amazing Trader. Note blue resistance lines dominating.
Jay Meisler, co-founder global-view,com and creator of The Amazing Trader
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