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AUD/JPY Vol Hedges Dominate as Spot Nears Day's Highs

FOREX
  • AUD/JPY trades within reach of the day's highs - but short of the best levels seen last week at 98.21. Strength and clearance here would make cycle highs at 99.06 the next key resistance - but unlikely to come into range in the near-term outside of a major dovish BoJ surprise next week. This keeps 97.46 - 98.21 the key technical parameters at present, the latter marking the 50-dma which provided some support earlier this month.
  • Easily most sizeable trade of the session so far in AUD/JPY options markets around 45 minutes ago, as trades cross consistent with a sizeable 3-month vol hedge - 93.55/99.25 strangle expiring mid-June, thereby capturing potential policy pivots from the BoJ/RBA.
  • One-week AUDJPY vols hold well north of 10 points, around 3 vols above the YTD background average as the contract captures both the BoJ and RBA decisions due next week. While vols are certainly elevated, they remain shy of of the near 17 vol points that prevailing mid-December last year.
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