Last week’s recap
Toward the end of the week there were a couple of good trades that bounced cleanly off their zones, and both were exited well into the close of the day.
The part that matters more than the trades: the probability of a rate hike kept climbing all week. First 60%, then 72%, and now around 87%.
So the driver is Wednesday. The rate decision is what everyone is waiting for, and the next move in the assets only becomes clear from there.
JPY
The maximum-volatility zones for Wednesday and for the whole week are marked.
Toward the end of the week the 64 strike becomes interesting for trading volatility into early October. Right now the puts there cost more than $100 — but on a move to the 67 strike they drop to around $20–30. On a spike the value falls seven to ten times. So from Wednesday’s maximum volatility the plan is to start buying puts.
The zones above get worked with futures instead. There are visible levels there, and the yen has a habit of reacting to them.
EUR
They are trading volatility that is easily accompanied by a future in either direction — there are no directional openings here. The zones and the contract balance are formed, so both can be worked off and toward.
A hike on Wednesday looks unlikely. The first reaction is negative, and after that it depends on what Warsh says. Visually it looks like a move down toward 1.1547, and after Wednesday they give direction into November. If they break that zone, it opens the path to 1.1170 by November — though it is equally possible they reverse hard upward after the spill.
Which is why this is the key week for the medium-term move. Near term, until the Wednesday clearing, these option zones are the ones worth watching: at 1.1547 there is an intersection of interest with almost 11,000 puts, so getting through will be very hard.
GBP
They keep adding to the 34 strike — over 4,500 puts there now. The maximum-volatility zones for Wednesday and for the week are marked as well.
If from the open they go up and can hold above 0.3570, then 0.3520 is workable on the pullback, targeting the zones above. Equally, on a move down the plan is to try to buy back off the lower zones.
No sells yet — that needs the open first, and where they take it. Until Wednesday a flat is quite likely: everyone is waiting on the rate decision.
DXY — the dollar index
The dollar looks weak on the candle formation alone. 94 to 104 is the base of the movement’s amplitude, and the contract balance sits at 98.75 to 98.90.
S&P 500
These options got oversold, which is strange given how small the profit is. Potential contract balance is 7721 to 7725 — but it will be clearer by Friday, since the quarterly expiration lands here too.
Gold
At the open this zone is the one of interest. Up top a fair amount of hedge has opened, and looking at it I doubt they go to 4930 — at the moment selling is the more interesting side.
It is a pity they are not highlighting 3850 on the downside, so for now the main targets for sells are 4220 and 4195. After the rate decision, the big players with targets should show up.
Silver
This is the third test of the lows in the current balance. They will be increasing the amplitude into the annual expiration, with main targets of 45 and 86 if it runs both ways.
The main plan is to wait: either a move above 68 and then look at buys, or a break down and, on the pullback to 65, trade to the downside.
The plan, in one line
These are zones and scenarios being watched — the market decides, not the trader. Let price come to your levels and let the confirmations line up before you act. New to the terms? The glossary covers every structure named above — and if this is your first visit, where to start lays out a reading order through the free material.