FX option expiries for 24 February 10am New York cut

There are a couple to take note of on the day, as highlighted in bold.

They are for EUR/USD at the 1.0500 and 1.0525 levels. The euro is underpinned after the German election results over the weekend. The result sees Friedrich Merz’s CDU/CSU alliance take charge, with coalition negotiations now in the works. They’ll have to either team up with SPD and Greens as potential partners. Given how the SPD’s influence is waning, Merz is likely to want to team up with the Greens instead surely.

The CDU/CSU alliance have been largely in favour of maintaining Germany’s debt brake but if they are to rely on support from the Greens, perhaps they may have to work through some reforms on that.

If Germany moves to relax the debt brake – allowing for more public investment into infrastructure, green energy, etc – then that could bolster growth and lead to increased government spending in the short-term.

Those are factors in favour of a stronger euro and a better outlook for euro area assets. But if it threatens to destabilise debt concerns, then that might have an adverse impact on the euro in the long-term. That being said, Germany has one of the lowest debt-to-GDP ratios in the region, so there’s no need to worry too much for now.

Circling back to the expiries, with the euro underpinned as such, we could be eyeing at a firm break of 1.0500. That will see the expiries act as a defensive layer in keeping the single currency more bid throughout the day as buyers look to use that as a platform for a stronger upside break this week.

For more information on how to use this data, you may refer to this post here.

This article was written by Justin Low at www.forexlive.com.