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Pressure on JPY Vols Aids Further Selling Via Crosses

JPY
  • With BoJ event risk out of the way, and the market content that today's rate hike will not be the first in a sequence of policy steps, the front-end of the USDJPY vol curve has resumed it's slide, putting 1m vols briefly through 7 points and close to the lowest levels in two years.
  • USD/JPY spot's 1% rally, and the break above Y150.50, was priced at an implied probability of 17% via options markets yesterday - and the pull lower in vols is clearly aiding further JPY selling in the crosses - contributing to the post-BoJ trade today.
  • This leaves JPY flirting with some key levels - and another push lower will see resistance tested: USD/JPY at 150.89, EUR/JPY at Feb's 163.72 and GBP/JPY at 191.32.

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