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FOREX: JPY Vols Tipped to New YTD High Ahead of BoJ Decision

FOREX
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  • JPY markets remain of interest, with overnight vols capturing the Friday BoJ rate decision. Implied vol expiring Friday is bid, tipped up to 19 points for the first time since mid-December as markets anticipate a 25bps hike to 0.50% in Japan. JPY is suitably slightly firmer early Thursday, but price action is generally contained.
  • USD/JPY is just below the Y156.50 mark at typing, with Y156.29 marking soft support ahead of the weekly (post-tariff headlines) low of Y154.78.
  • The USD Index holds above the weekly low, but remains comfortably off the year's best levels. That said, the underlying uptrend remains in tact given the stabilisation above the 50-dma support this week. The upswing in near-term momentum remains a key driver here and notably the premium for the 50-dma over the 200-dma is at a new cycle high today (~2.8%) and the largest since late 2022.
  • AUD and NZD sit slightly softer as global equities roll slightly off this week's highest levels. European stocks are in very minor negative territory into the NY crossover as prices roll off record highs, dragging risk sensitive stocks with it. Adding to the pressure here is gold prices, which are through yesterday's lows and prompting a softer precious metals backdrop.
  • Weekly US jobless claims data and Canadian retail sales are the calendar highlights, although more attention will likely be paid to Trump's video-link appearance at the World Economic Forum in Davos - set for 1600GMT/1100ET.
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  • JPY markets remain of interest, with overnight vols capturing the Friday BoJ rate decision. Implied vol expiring Friday is bid, tipped up to 19 points for the first time since mid-December as markets anticipate a 25bps hike to 0.50% in Japan. JPY is suitably slightly firmer early Thursday, but price action is generally contained.
  • USD/JPY is just below the Y156.50 mark at typing, with Y156.29 marking soft support ahead of the weekly (post-tariff headlines) low of Y154.78.
  • The USD Index holds above the weekly low, but remains comfortably off the year's best levels. That said, the underlying uptrend remains in tact given the stabilisation above the 50-dma support this week. The upswing in near-term momentum remains a key driver here and notably the premium for the 50-dma over the 200-dma is at a new cycle high today (~2.8%) and the largest since late 2022.
  • AUD and NZD sit slightly softer as global equities roll slightly off this week's highest levels. European stocks are in very minor negative territory into the NY crossover as prices roll off record highs, dragging risk sensitive stocks with it. Adding to the pressure here is gold prices, which are through yesterday's lows and prompting a softer precious metals backdrop.
  • Weekly US jobless claims data and Canadian retail sales are the calendar highlights, although more attention will likely be paid to Trump's video-link appearance at the World Economic Forum in Davos - set for 1600GMT/1100ET.