USD/JPY Surges To New Cycle Highs, Option Activity Eyed

The rally in USD/JPY continued Thursday, as the rate breached strong resistance from Y111.12 (Jun 24/30 highs) and operated within close proximity to Mar 24, 2020 high of Y111.71. The upswing allowed USD/JPY to touch its upper 2.0% Bollinger band, but it failed to establish itself above there. The move was amplified by broad-based demand for the greenback, ahead of today's NFP report.

• Notable option activity was eyed yesterday, as participants prepared for the key jobs report due out of the U.S. Implied overnight volatility in USD/JPY showed at its highest point (11.4%) since the Mar FOMC MonPol meeting, before easing off. 1-week tenor printed best levels (6.4%) since May 13 in Thursday's London hours.
• In addition, there are some chunky expiries ahead, with $2.0bn of options with strikes at Y111.00 & $2.0 of USD calls with strikes at Y111.40-50 due to roll off at today's NY cut.
• In Japan, PM Suga reiterated that some Olympic events could be held without spectators, while Yomiuri reported that the organisers are planning as much. According to Sankei, the gov't wants to extend virus counter-measures in the Tokyo area by about a month, hence covering the entire duration of the Olympics.
• As a reminder, Tokyoites will head to the polls on Sunday to elect members of the metropolitan assembly. Polling suggests that PM Suga's LDP should be ahead of the pack and beat the Tokyo First party founded by Gov Koike.
• Next week's highlights in Japan include a speech from BoJ Gov Kuroda (Monday), earnings/spending data (Tuesday) as well as BoP current account balance & Eco Watchers Survey (Thursday).
• USD/JPY last trades at Y111.55, little changed on the day. Bulls look for a break above Mar 24, 2020 high of Y111.71, which would open up Feb 20, 2020 high of Y112.23. Bears see Jun 30 low of Y110.42 as their initial target.