USD/JPY vols are underpinned in the front end of the curve, with the 1-wk at 7.15/7.90 and the 1-mth at 7.05/7.35. The curve has continued to build on yesterday's gains as spot traded down to a fresh session low of 116.22. Profit taking and standing Japanese bids have alleviated some of the downside pressure.
However, sentiment is clearly skewed toward 116.00 barriers and this has left a nervous tone in the curve. A break of 116.00 would see prices gap higher as players look to take in more vol on their books. Risk reversals retain a bid tone at 0.80/0.95% JPY calls over in the 1-mth 25-d contract.
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