USD/JPY - Risk Reversals at one-month high
|- An uptick in USD/JPY risk reversals gauge indicates falling demand for Put options
- The drop in the volatility gauge indicates fading uncertainty following the Japanese elections
The Dollar-Yen pair fell from 114.10 to 113.24 on Monday, largely on the back of profit taking on the Yen shorts following Abe's victory in the Japanese elections.
Risk reversals at one-month high
- One-month 25 delta risk reversals rose to -0.85 on Monday; the highest level since September 21. The sharp recovery from the Oct. 9 low of -1.875 indicates falling demand for Put options (bearish bets).
- Meanwhile, one-month ATM options volatility dropped to 8.153 on Monday from Friday's level of 8.225. The recent high stands at 10.00.
The decline in the volatility, coupled with a falling demand for Put options (as shown by the risk reversals gauge) indicates the USD/JPY pair could regain the bid tone today.
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