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Hardy: The market lacks conviction so look at your options

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Saxo's John Hardy says there is a lack of conviction in the market at the moment. He says it continues to be plagued by risk sentiment, as experienced by USDJPY over the last day. But he also warns that there are still key risks to look out for, most notably Thursday's European Central Bank meeting.

Hardy expects the ECB's Mario Draghi to be dovish in his address. If the inflation forecast is adjusted lower, he says expect more quantitative easing. And watch the Japanese yen carefully, he suggests.

US data is also important as the nonfarm payrolls are released on Friday. But the US dollar is also affected by risk sentiment, explains John, which is tied to the Federal Reserve's rate hike cycle. Even if that does happen this month, expectations are for a shallow rate hike trajectory. It would take exceptionally weak US data to encourage strong USD selling.

John urges caution when trading this week, particularly in Eurodollar, because it's hard to find entry levels. He says put options may be worth considering.