FX Options Insights 18/07/24
The FX options market saw an increase in implied volatility earlier in the week, particularly for JPY-related pairings as USD/JPY fell on Wednesday. However, it appears that volatility has peaked for now. Data from the Bank of Japan's balance sheet suggests that the drop in USD/JPY was not due to intervention. Interest in buying JPY calls has risen, leading to a premium over JPY puts on 1-month 25 delta risk reversals.
Meanwhile, options indicated a bet on further GBP/USD gains towards the 1.3000 barriers, with increased demand lifting GBP/USD implied volatility and risk reversals. On the other hand, EUR/USD did not see much change in volatility despite expectations of an uneventful ECB policy announcement. Overall, implied volatility remains relatively low, and risk reversals reflect a relatively neutral directional bias for shorter-dated expiries.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!