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Overnight Vols Blow Wider, Implying Highest JPY Sensitivity Since December

JPY
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  • Option vol for contracts expiring after the BoJ tomorrow have suitably surged, with the contract rallying to 30 points, the highest level this year and the highest since the December BoJ decision. The run higher in vols blows out the break-even on an overnight straddle to around ~190 pips, almost four times the implied overnight swing relative to the YTD average background vol.
  • We wrote last week that the next phase higher for USD/JPY could be harder to come by, with extremely short positioning and an overbought technical condition making gains more difficult from here – however a placid attitude from the BoJ toward the currency could unlock fresh USD/JPY longs – with upside hedges targeting 157.50 and resistance at 157.65, the 2.236 proj of the Feb 1 - 13 - Mar 8 price swing.
  • Overnights are not the only part of the curve seeing interest, with one-week USD maturities surging across G10 as the contracts capture Wednesday’s Fed decision – although JPY is clearly more sensitive relative to peers. Our full BoJ preview found here: https://roar-assets-auto.rbl.ms/files/61017/BOJ%20...

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  • Option vol for contracts expiring after the BoJ tomorrow have suitably surged, with the contract rallying to 30 points, the highest level this year and the highest since the December BoJ decision. The run higher in vols blows out the break-even on an overnight straddle to around ~190 pips, almost four times the implied overnight swing relative to the YTD average background vol.
  • We wrote last week that the next phase higher for USD/JPY could be harder to come by, with extremely short positioning and an overbought technical condition making gains more difficult from here – however a placid attitude from the BoJ toward the currency could unlock fresh USD/JPY longs – with upside hedges targeting 157.50 and resistance at 157.65, the 2.236 proj of the Feb 1 - 13 - Mar 8 price swing.
  • Overnights are not the only part of the curve seeing interest, with one-week USD maturities surging across G10 as the contracts capture Wednesday’s Fed decision – although JPY is clearly more sensitive relative to peers. Our full BoJ preview found here: https://roar-assets-auto.rbl.ms/files/61017/BOJ%20...