USD/JPY short dated vols trade on a heavy footing after the modest pullback in the European morning. The 1-wk currently indicates 6.15/6.90 and the 1-mth shows 6.65/6.95. The absence of Tokyo traders and a higher spot has encouraged ATM selling. The spot move away from the 118.00 area has seen a reduction gamma and selling of strikes in the low 118's has been noted.
A 118.40 O/N strike was given down to 8.0% in Asia and a Friday 117.85-119.00 risk reversals traded at 0.50% for JPY calls over. The curve is unlikely to shift onto higher levels unless spot can successfully take out 118.00 support. This level has seen resolute defence, with sizeable commercial name interest. The remainder of the curve is also beginning to fall away as spot eyes the topside. The 3-mth is at 6.60/6.85, 6-mth shows 6.75/7.00 and the 1-yr is at 6.85/7.15.
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