Get started

Euroyen

BOJ: JPY V USD, EUR, GBP - WHAT THE OPTION MARKET IS TELLING US50 Delta ATM Volatilities: USDJPY - - $Yen has an ATM implied volatility curve of 55.95%mrkt 24.08%1wk 18.31%2wk 14.12%1m - Obviously we are aggressively steeper in the front end, with BOJ tomorrow and JPY MOF Fiscal Package details coming next week providing heightened vol for the 1day and 1wk vols - naturally we then see the curve tail off as the event vol fades. GBPJPY - - £Yen has an ATM implied volatility curve of 58.66%mrkt 25.93%1wk 23.02%2wk 18.30%1m - The same can be said about sterling yens ATM curve, adding that it is steeper accross the tenors as the recently heightened GBP risk/ BOE event vol is priced into the 1wks and 2wks greater relatively vs $yen, with 1ms also outperforming $Yen as the perceived GBP risk/ vol post-brexit carries higher vs the USD. EURJPY - - EUROYEN has an ATM implied volatility curve of 49.42%mrkt 22.82%1wk 18.03%2wk 14.23%1m - EUROYEN mirrors $yen from 1wk-1m as the term structure is very similar for eur vs usd (no significant event vol expected). Though we see a notable 6-7vol divergence in the current vol which is expected as $Yen expressions are favourable for BOJ out-performance positionings (USD a firmer based/ more widely traded) and £Yen are favourable for BOJ under-performance structures as BOE next week compunds the attractiveness in the downside of the cross (BOE likely to ease) which in turn increases the demand for £Yen expression on a BOJ no-show. 25Delta Risk Reversals (25d call vol minus 25d put vol - examines the relative demand) USDJPY - - $Yen RRs are +3 mrkt, +0.62 1wk, -0.67 2wk, -0.81m - Interestingly we are seeing a moderate $Yen topside coverage in the front end (e.g. current and 1wks) implying the market is hedging/ positioning for a BOJ Out-performance Surprise (call demand > Put). The RRs are quite small at +1 so i wouldnt say there is a huge consensus on BOJ HIT expectations. Nonetheless calls are likely being purchased to hedge underlying spot short positions in the near term as any $yen/ BOJ topside is expected to not last long and be faded aggressively - which explains the switch to negative RRs after the BOJ/ MOF events have passed. GBPJPY - - £Yen RRs are -6 mrkt, -3 1wk, -1.3 2wk, -2.2 1m - Understandably SterlingYen has a different RR structure as BOJ and BOE predispositions are priced into option structures, rather than just BOJ (as is the case for £yen and euroyen) - so we see a strong put bias, particularly in the front end (current and 1wks) as these cover the BOE and BOJ event vol. Unlike $Yen we see there is a clear trend for BOJ miss/ downside speculation as it is the logical chosen proxy, as a BOJ miss is highly likely to then be compounded over the current and 1wk terms as BOE hit expectations are priced in, accelerating the GBPJPY to the downside and RRs towards the LHS (BOJ miss = yen strength, BOE hit = Streling weakness - aggressive downside). Also put gbpjpy, automatically hedges any BOJ hit/topside risk as 1wk later the BOE is likely to ease so any yen downside arising from a BOJ hit will likely be smoothed somewhat by BOE easing induced GBP selling; thus lessening the negative impact or even turning the position back into the money.
by QuantumLogicTrading
6
EURJPY POTENTIAL SHORT @ ~134.500After breaking out of the descending triangle as I pointed out in the last idea, prices should now climb back to the ~134.500 area to "test" the previous intermediate demand zone. Should the zone still be imbalanced another push to the downside is likely. This level coincides with the 0.50/0.618 of the previous down move and should head to ~132.500 if not lower. Expect a rally anywhere near ~131.000. R/R is dependent on how the prices go into the 134.500 zone
Short
by selfrighteousgambler
EURJPY Short @~135.100Price has been moving lower recently, creating a descending triangle (bearish pattern). Intermediate supply zone @ ~135.210. Reaction from the area should hopefully bring about a drop in price. Distance of drop should be equal to width of triangle (all things being equal). Possible target, 134.000. The zone @ ~135.580 has been tested a few times and should be watched as although it has been tested and demand is reducing, the zone can still be a stumbling block to profit taking.
Short
by selfrighteousgambler
1