BUZZ-FX options wrap - USD and volatility clues, enticing JPY, expiries

Implied volatility is under broad-based pressure - testing 2025 lows across 1-12 month expiry term structures in many of the USD vs major currency pairs.

The weaker USD and improved risk appetite are lessening the risk of any renewed and rapid USD gains and related FX realised volatility on a near term horizon.

Risk reversals show that the volatility premium for USD calls over puts is losing more ground against EUR, GBP and AUD - reinforcing a diminished near term risk of a renewed USD resurgence that reignites FX volatility.

EUR/USD option flows have shown some interest to buy upside strikes between 1.0450-1.0650, but not much above, so far. There's also been some mild covering of GBP/USD and AUD/USD higher strikes, too.

USD/JPY has seen some decent realised volatility which is limiting the overall decline for implied volatility. Current prices are already offering better risk versus reward potential. There's been steady demand for JPY calls, many with strikes below 150.00 and expiries over coming weeks and months that would benefit from deeper USD/JPY declines.

There's a U.S. holiday on Monday and little in the way of key data next week which could leave larger FX option strike expiries and related hedging flows to have a greater influence on FX trading.

For more click on FXBUZ