The demand for the USD had initially surged due to risk aversion at the beginning of the week, but signs of this demand began to diminish as traders prepared for the critical U.S. jobs report set to be released on Friday. As a result, traders took action to cover their positions on EUR/USD topside strikes, anticipating movement in the market.

This strategic positioning by traders proved to be insightful. When the Non-Farm Payroll (NFP) data was released, it came in significantly weaker than analysts had expected, which triggered a widespread selloff of the USD across various pairs. This reaction highlighted the volatility surrounding the jobs data, with overnight expiry implied volatility already indicating increased risk. It became apparent that the premiums traders paid for protection against market moves were well justified given the unexpected report.

Following the release of the jobs data, broader volatility began to decline as the immediate impact of the news was absorbed into the market. However, setbacks in volatility are expected to be temporary for shorter-dated expiries, especially with the upcoming U.S. Consumer Price Index (CPI) report on the horizon. The CPI results are crucial as they will inform the Federal Reserve's decisions regarding future interest rates and potentially serve as another trigger for market volatility.

Meanwhile, the GBP/USD pair experienced significant movement over the week, primarily due to concerns regarding UK fiscal policy. These worries further contributed to the decline of the GBP/USD rate and simultaneously elevated related implied volatility. The situation surrounding the UK budget, which has a confirmation date set for November 26, intensified volatility as traders braced for the implications of the fiscal measures.

While there has been a recovery in the spot market, affecting the implied volatility for shorter-term expiries, there remains considerable interest among traders in purchasing longer-dated options, particularly those with downside strikes. This indicates a strategic approach to hedge against potential further declines in the GBP or to capitalise on expected movements.

In the broader context, implied volatility for expiry periods under three months in most of the major G10 foreign exchange pairings has recently retraced a significant portion of the gains made earlier in the week. However, the longer-dated expiries are either stable or showing higher levels of implied volatility, suggesting that traders are still cautious and anticipating further market movements due to upcoming economic reports and the uncertain fiscal landscape.

The hedging of soon-to-expire FX options may strengthen nearby support and resistance levels and may have a pull on FX prices leading up to each day's 10 a.m. New York (1400 GMT) expiration. Thus, it's beneficial to be aware of the location of significant strikes in advance.

Day & Date Strike(s) Notional (EUR)

Monday Sep 8

1.1600 2.1 billion

1.1620–30 1.2 billion

1.1650 437 million

1.1700 1.6 billion

1.1750 1.6 billion

1.1800 1.1 billion

Tuesday Sep 9

1.1650 801 million

1.1700–05 1 billion

1.1750–60 1.5 billion

Wednesday Sep 10

1.1600 1.1 billion

1.1650 1.5 billion

1.1675–80 1.2 billion

Thursday Sep 11

1.1635–45 3.8 billion

1.1650–55 1.2 billion

1.1675–80 1 billion

1.1700 875 million

1.1740–50 1.5 billion

1.1800 1.1 billion

1.1825 1.4 billion

Friday Sep 12

1.1550 2.3 billion

1.1600 2.3 billion

1.1650 1.1 billion

1.1670–75 1.5 billion

1.1700 2.6 billion

1.1725–35 2.2 billion

1.1800 1.4 billion