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OPTIONS: USD Vols Elevated, But Pale in Comparison to NFP Risk

OPTIONS
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  • The very front-end of the USD vol curve is unsurprisingly bid headed into tomorrow's US inflation print, with overnight EUR/USD implied cresting at 9.5 points this morning. That's still comfortably north of the running August average (6.1 points), but not far off half the prevailing levels ahead of Friday's NFP print.
  • This gels well with the view that the Fed are leaning more heavily on the employment aspect of the dual mandate - likely making markets less sensitive to tomorrow's inflation print relative to Friday's labour market report.
  • Today's pick up in vols pushes the break-even on an overnight straddle to ~40 pips, meaning a hawkish CPI print tomorrow would press the pair toward the key area of support identified on the 15min candle charts at 1.0970-77. 15 minute candles identify downtrendline support drawn off the Aug22 low crossing in the 1.0973 area. A break below this mark would extend the pace of the correction off the late August high, and likely trigger a break of the bear trigger at the 50-day EMA (today at 1.0977).
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  • The very front-end of the USD vol curve is unsurprisingly bid headed into tomorrow's US inflation print, with overnight EUR/USD implied cresting at 9.5 points this morning. That's still comfortably north of the running August average (6.1 points), but not far off half the prevailing levels ahead of Friday's NFP print.
  • This gels well with the view that the Fed are leaning more heavily on the employment aspect of the dual mandate - likely making markets less sensitive to tomorrow's inflation print relative to Friday's labour market report.
  • Today's pick up in vols pushes the break-even on an overnight straddle to ~40 pips, meaning a hawkish CPI print tomorrow would press the pair toward the key area of support identified on the 15min candle charts at 1.0970-77. 15 minute candles identify downtrendline support drawn off the Aug22 low crossing in the 1.0973 area. A break below this mark would extend the pace of the correction off the late August high, and likely trigger a break of the bear trigger at the 50-day EMA (today at 1.0977).