News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.55%, while traders in Germany 30 are at opposite extremes with 80.61%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/YelFfA2Vst
  • 🇮🇩 Interest Rate Decision Actual: 3.5% Expected: 3.5% Previous: 3.5% https://www.dailyfx.com/economic-calendar#2021-04-20
  • Risk management is one of the most important aspects of successful trading, but is often overlooked. What are some basic principles or risk management? Find out from @PaulRobinsonFX here: https://t.co/IsnpfJhp91 https://t.co/5xuwJi0xvX
  • Commodities Update: As of 07:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 1.02% Silver: 0.36% Gold: -0.14% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/3QhJMfTWva
  • Forex Update: As of 07:00, these are your best and worst performers based on the London trading schedule: 🇦🇺AUD: 0.65% 🇳🇿NZD: 0.58% 🇨🇦CAD: 0.39% 🇬🇧GBP: 0.13% 🇨🇭CHF: 0.03% 🇯🇵JPY: -0.30% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/3ngNFGV4CH
  • Heads Up:🇮🇩 Interest Rate Decision due at 07:30 GMT (15min) Expected: 3.5% Previous: 3.5% https://www.dailyfx.com/economic-calendar#2021-04-20
  • Indices Update: As of 07:00, these are your best and worst performers based on the London trading schedule: Wall Street: 0.13% US 500: 0.08% Germany 30: -0.16% France 40: -0.19% FTSE 100: -0.20% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/cmd7UutJDY
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/bg5cVcLvvW
  • (Commodities) Gold Prices Seesaw as US Dollar, Treasury Yields Diverge Before Netflix Earnings #Gold #XAUUSD #USD #Bonds https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2021/04/20/Gold-Prices-Seesaw-as-US-Dollar-Treasury-Yields-Diverge-Before-Netflix-Earnings.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/aYDFImOCGw
  • 🇬🇧 Claimant Count Change (MAR) Actual: 10.1K Previous: 86.6K https://www.dailyfx.com/economic-calendar#2021-04-20
USD/JPY Options May Be Underestimating Potential for Price Movement

USD/JPY Options May Be Underestimating Potential for Price Movement

Paul Robinson, Strategist

What’s inside:

  • One-week implied volatility trading at 7.97% while one-month is at 9.18%
  • Trading range reflects the lack of volatility and expectations
  • Key-reversal on failed breakout at resistance signals an increased likelihood of a downside break

Find out in our Q4 Forecast what is expected to drive the FX market through year-end.

USD/JPY Options May Be Underestimating Potential for Price Movement

USDJPY short-term implied volatility may be underpricing a sustained breakout from the recent trading range; downside looks like the biggest risk at the moment.

When comparing 1-week to 1-month implied volatility the shorter dated options are pricing in less movement in USDJPY in the near-term than their longer-dated counterparts. One-month IV is at 9.18% while one-week is at only 7.97%. Volatility has been on the decline in recent weeks and the trading range in the Yen highlights this. The fact the currency has a ‘risk-on, risk-off’ component to it only helped push volatility lower as risk appetite for stocks has been strong, compacting volatility in major equity indices as evidenced by the CBOE VIX index (S&P 500) which continues to hover around 10.

But just as volatility has come down it can quickly go back up (that is the nature of volatility, mean-reverting). It's not just Yen, expectations for short-term volatility has dropped across the spectrum of major USD-pairs outside of NZDUSD, where 1-week IV is at 9.73% versus a 1-month level of 9.38%. But even there vol is coming down.

Moving ahead through the course of the next week we could soon see a sustained breakout in the recent range trading range. Friday’s attempt to break to the top-side failed, putting in a key-reversal bar at an intersection of the underside of the September trend-line (a consistent hurdle recently) and the trend-line running down off the March high. This could soon spell weakness for USDJPY, and if we see a pullback with any kind of force develop in stocks then look for the pair to come under additional pressure. In this case, we would look for the one-week one-standard deviation range-low at 11138 to be exceeded. Turning higher, the bearish reversal and resistance levels would need to be overcome for USDJPY to have a shot at trading up to the double-top from May and July.

Related events/data: The BoJ’s Kuroda will be speaking at 12:30 am GMT time on Tuesday; FOMC September meeting minutes on Wednesday; CPI, Advance Retail Sales, and UofM Confidence on Friday. For details, please see the economic calendar. North Korea/U.S. tensions flaring up is of course always a threat.

For other currency volatility-related articles please visit the Binaries page.

USDJPY: Daily

USDJPY daily chart

Join Paul live each week; for details please see the Webinar Calendar.

---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES