FxWirePro: What drives euro today? EUR/JPY options analytics and hedging strategies

Market Driving Forces for the Day: Euro seems to have been momentarily cushioned by Italy news, Italy-Germany yield differential in focus for further direction. 

While politics continue to be an eye-catchy news for the financial markets with the Italian-EU budget clash ahead of the official budget submission to the EU on 15thOctober and the prevailing UK Conservative Party Conference, that concludes today. The Italian government has agreed a draft budget deficit of 2.4% of GDP for 2019. Financial markets have responded by selling the euro and risk assets with the Italian stock market off 5%.

While PM Theresa May is scheduled to speak today. Italy's finance minister Tria is due to speak at 11:30 and Deputy PM Salvini at 15:00 CEST.

Furthermore, in the Euroarea, the important data announcement is scheduled for the day, PMI service index (German, Spanish, Italian, and French PMI flashes) are due out at 10:30 CEST. Consensus have been such that the growth remains subdued.

Although EUR/JPY has been attempting to show support at 21DMAs, the major trend still seems to be edgy at 133.131 (which is near 61.8% Fibonacci retracements from the June lows. For more details of trend analysis of this pair, refer our technical section.

FX Derivatives Trade Tips (EURJPY):

Keeping above data events into the consideration, we advocate deploying below derivatives strategies on hedging grounds:

• Buy 2m EURJPY ATM -0.49 delta puts for aggressive bears on hedging grounds. If expiry is not near, delta movement wouldn’t be 1 point increase with 1 pip in the underlying spot FX. Which means if the spot FX moves 1 pip, depending on the strike price of the option, the option would also move less than 1.

• Buy 2M EUR puts/JPY calls vs. sell 2M 28D EUR puts/KRW calls for directional traders.
• Alternatively, ahead of PMI data announcement today, we advocate shorts in futures contracts of mid-month tenors with a view to arresting potential dips.Source: sentrix, saxobank

Currency Strength Index:FxWirePro's hourly EUR spot index is flashing at 20 levels (which is mildly bullish), while hourly JPY spot index was at -24 (mildly bearish) while articulating at (07:02 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex