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OPTIONS: Hedgers Target Recovery in AUD/JPY

OPTIONS
  • No surprise to see exceptionally low FX options volumes on Monday due to the UK Bank Holiday (in fact, activity was the lowest since July 4th holidays) - and that impact is carrying over into Tuesday trade with overall volumes well below normal for this time of day.
  • That said, there are hotspots of activity today, with demand for AUD/JPY upside a clear standout. Call strikes layered between 98.50 - 100.80 make up the bulk of vanilla options trade, as markets look to target the horizontally-trending 200-dma of 99.98. Most legs are shorter-dated, targeting an expiry of mid-September, therefore rolling off well ahead of the next BoJ, RBA meetings.
  • Shorter-dated vols across G10 are seeing some relief following the passage of Jackson Hole, but maturities beyond 1m remain supported as markets roll toward September. EUR/USD 1m vols hold north of 6 points with spot remaining supported above consensus for the coming month (1.1170 at typing vs. ~1.0930 median for Sept).
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