The EURUSD is trading to a new week low at 1.10973 and trade just off that level as I type. the Tuesday low at 1.11038 was the prior low.  The EURUSD got a shove lower after running away from the 100 hour MA (at 1.11362), the 200 day MA (at 1.1133), and the 200 hour MA (green line at 1.11299 currently). An upward sloping trend line was also busted and helped to shift the buyers to sellers.

On more downside, the pair is looking toward a lower channel trend line on the hourly at 1.1090.  A move below that and the low from last week at 1.10843 will be eyed.

Of note is that there is $1.6B of option settles at 1.1100 at the 10 AM ET cut off. Option sellers reap all the decay when the option settles at the strike price (so at 1.1100). That is the best case scenario. Option buyers want to see the price move away from that strike price.    That dynamic may lead to an impact on the currency pair (on hedging activity).  Nothing is guaranteed of course but there may be a magnate that keeps the price near this level into the 10 PM option cut off if the sellers are more in control.  However, if the price starts to move away, those option sellers may be forced to hedge their exposure into the settle.

USD/CNY is resting at six-month lows now as China continues to make good on its currency pledge with the US in the Phase One trade deal. But this is just a bit of a corrective movement after the fall in the yuan at the start of August last year.

In looking at the yuan this year, there’s going to be two sides of the equation.

On the one hand, China would prefer a weaker currency to deal with US tariffs. On the other hand, China would prefer a stronger currency if it is to step up purchases from the US – in trying to achieve the $200 billion set out by the trade deal.

Put those two together and the fact that China gave the US the same pledge as it has been promising the G20, I reckon we can expect the yuan to find more stability this year – once Chinese officials settle on where it feels the right balance should be.

Once the currency settles into that “sweet spot”, we can expect some mild movement around 2% up or down from time to time but I wouldn’t expect a significant move like what we saw in trading last year – especially the August incident.

The caveat is that all of this hinges on the US-China Phase One agreement being able to last. So, let’s see how that shapes up during the course of the year.