FxVol Weekly
15 - Apr - 2022
AUD two week breaks below the six-week actuals while the spot remains well above the trendline shown above. The AUD implied curve ticked lower and at the same time the bid in the risk reversal actually declined for AUD puts.
Clear signs of CADJPY dispersion topping using the daily data. This supports the view that the top is now finally in and at minimum we are in for a period of price consolidation.
CADJPY implied vols fail to make a new high in line with the spot. Spread vs the actuals remains wide and expensive on our percentile rank indicators.
More signs of momentum divergence as the spot makes a fresh high and hourly momentum fails to do the same.
CADJPY risk reversals are close to their most recent cyclical highs. Potentially another potential sign of a top.
Hourly CADJPY dispersion showing signs of rolling over in our longer-term measure
The hourly EURCAD momentum chart continues to suggest a short term bottom, however as you might well expect the daily long term momentum chart is far away from signally a bottom.
The front end of the EURGBP risk reversal is showing up as at an extreme according to our models. While the one year is also cheap it is not to the same degree. This is a signal that corporate hedgers that are short EUR vs GBP should seriously consider a risk reversal hedge.
EURJPY daily dispersion rolling over in our daily measure and at the same time, we have a double top formation.
The hourly dispersion chart in EURJPY shows a similar rolling over in our longer-term indicator and the double top formation more clearly.
Is GBPUSD about to make the decisive break below 1.3000? I would appear that a move in one direction or other is now more likely as the daily dispersion makes fresh lows.
From a fundamental perspective, the current pricing of EURJPY may well be the most misaligned price in the FX market at the present time.
With the EUR making new fresh cyclical lows, one would expect the options market to be bid over the actuals, whereas the spread is actually negative.
CHF risk reversals maintain their slow grind better bid for USD Calls. This is to be expected particularly if the market becomes more convinced that the bottom is in with respect to EURCHF.
The dollar-yen is holding its sharp upwardly sloping trend line while momentum is not making fresh highs. It will not take much of a move lower to at least take out the trendline from here.
All maturities of the Yen risk reversal curve at showing up as at an extreme according to our models. Corporates that are short yen now have a rare opportunity to buy yen calls and sell puts for a vol credit.
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Research Director
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