From the FXWW Chatroom: BAML: BofAML’s Chief JPY Dealer, Tomo Makita remain core bullish USDJPY and is watching 114.00 as initial daily support to add to convictions (followed by 113.68 and 113.11). To the topside, 115.00 is unlikely to be a strong resistance compared to 105 or 110 as Japanese corps appear to be well hedged and less active. Above this, the 115.60-70 selling zone makes an all in 115.00 rate for 2017 March end, also that level is next big Fibo level of 61.8% retracement of 2015 high 125.86 and 2016 low 99.00. On the vol side, 1mth JPY vol and skew remain firm at 13.75% and -0.6% (bid for USD puts) respectively and BofAML’s FX options traders think the market has likely moved away from short vega exposures, using implied skew as an indication of market positioning. They believe there is better value in holding discounted topside gamma without necessarily holding downside short convictions. Gamma has been paying for itself in the last few sessions and should continue doing so with ISM tonight and NFP & the Italian referendum in the coming days.
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