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Dec 01 - 02:55 AM

USD/JPY - Risk Premiums Ease, But Recovery Faces Option Resistance

By Richard Pace  —  Dec 01 - 02:23 AM
  • Better risk sentiment and a firmer USD support USD/JPY in mid 113s Wed

  • USD/JPY recoveries capped 114.00 Tues-Mon. 113.50-114.00 is big option zone

  • $900-million expiries between 113.50-114.00 Wednesday nL1N2SM0DD

  • Thursday has $1.2-billion strikes expiring 113.60-70, $1.1-billion at 114.00

  • Another $1-billion between 113.50-114.00 Friday

  • Related option hedging flow will add congestion and hinder further recovery

  • USD/JPY option implied volatility and downside risk premiums are easing

  • Reflects better risk sentiment and lower perceived risk of USD/JPY drop

For more click on FXBUZ

USD/JPY 1-month expiry option implied volatility Click here

USD/JPY 1-month 25D risk reversals Click here

Refinitiv IFR Research/Market Commentary


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