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JPY: Second Session of JPY Gains Would Be First Since Intervention

JPY
  • The pullback off last week's highs in USD/JPY continues early Tuesday, with the pair through yesterday's lows and narrowing the gap with next key support at the 50-day EMA / 50-dma at 154.65 / 154.74. Pullbacks at these levels are considered corrective above the trendline drawn off the Dec 28 low - crossing today at 153.81. 
  • The JPY trade-weighed index is now firmer for a second session (two consecutive positive closes would be the first since the early May intervention) as Japanese ministers defend the effectiveness of currency intervention (Suzuki overnight) and as BoJ members warn of the impacts of a weak currency (Himino this morning). 
  • Option expiries in the pair are biased higher on Tuesday, with ~$1.5bln rolling off at 156.40-50 into the NY cut - but are more balanced across the week. The very front-end of the vol curve continues to build off lows as markets look ahead to a busy fortnight of risk events: FOMC on June 12th, BoJ on 14th.
  • Notably, 1m risk reversals have further faded off their post-intervention highs, and today the contract printed 1.2 points in favour of puts for the first time in a month, pressured by fading spot and lower perceived risk of sharp upside adjustments. 
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