USD/JPY vols turn offered, with spot trading back above 119.00. ATM sellers have come out in force since the curve opened at improved levels in today's session. The move into 119.00 is back in familiar territory and also where a decent number of strikes changed hands this week, fueling gamma related selling interest.
Vols traded on a cautious footing in the low 118's with the market a little under weight of gamma/vega from 118.00. The recovery in spot has seen the curve revert to last week's trough, which are relatively low on an historical basis. Price action will remain whippy as spot swings between 118.30-120.00. Movement on the extremes will encourage vol demand but the USD/JPY downside holds the biggest potential for an increase in vega.
The run through in the curve is at 6.45/7.20 in the 1-wk, 7.10/7.40 in the 1-mth and 7.35/7.55 in the 3-mth. The 6-mth and 1-yr contracts show 7.65/7.80 and 7.85/7.95 respectively.
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