AUD/USD option expiries to look out for in trading this week

Author: Justin Low | Category: Forex Orders

Some decent-sized expiries may help to limit price action this week despite downside pressure after Lowe's speech

  • 21 May: 0.6800 (A$909m)
  • 22 May: 0.6850 (A$604m)
  • 24 May: 0.6850 (A$406m), 0.6900 (A$510m)
I'm mostly alluding to the ones rolling off tomorrow and on Friday at the 0.6850 level. They're not exactly blockbuster amounts but they could play a hand in helping to limit further downside pressure in AUD/USD as markets continue to "price in" a rate cut by the RBA at its 4 June meeting in two weeks' time.

As mentioned earlier, I expect the aussie to stay pressured now as the backdrop and focus turns towards the RBA monetary policy decision. However, a significant drop from hereon (especially below 0.6800) is hard to really imagine barring any massive collapse in risk sentiment that is.

With AUD/USD now at 0.6873 near session lows, the OIS market has priced in a ~72% probability of a rate cut in two weeks' time. Meanwhile, Australian cash rate futures have a ~91% probability attached to it for the RBA to cut at its 4 June meeting.

Essentially, much of the expectation is already "priced in" at this point. Hence, just be wary that any further drop could result in retracements. That is why the 0.6850 level may be a point of interest given the expiries above, as well as support from the January 2016 lows around 0.6827-40 so keep an eye out on that too.

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