FxVol Weekly
22 - Apr - 2022

One month Yen risk reversal turns lower despite the spot making a new fresh cyclical high. At the same time, the risk reversal fails to break above the previous peak and has formed a RR double top. While the fate of the yen seems destined to be played out in the bond market both in US Treasuries and the BoJ attempting to cap JGBs, our indicators continue to imply that this move is well overdone.
More signs of momentum divergence, but the spot is still holding on to the hourly trend line.
An extremely wide spread between the one year yen implied vols and the actuals. Limited loss short vol strategies now starting to come into play for both six-month and one year maturities.
Dispersion failing to make new highs and clearly rolling over. Both suggest a directional top is now forming.
Same picture in CADJPY but in this case some evidence of a slight reversal in the directional trend.
CADJPY hourly just touching the hourly trend line while hourly dispersion also rolls over in both the short and the longer-term measure.
EURCAD just barely trading through the hourly trend line as dispersion declines. Our longer-term EUR and EURCAD momentum show no sign of turning just yet, so it may well be the case that we are still in a slow-motion decline. EURUSD risk reversals are off their lows, while one-month EURCAD risk reversal is now nearly back to par.
EURJPY also just holding on to its hourly trend line with our hourly dispersion indicator further implying that a cycle top is in place.
Hourly GBPJPY momentum divergence with the spot here too just barely holding the hourly trend line. The conclusion is that the Yen may well break lower on the crosses (GBPJPY, EURJPY & CADJPY).
GBPJPY hourly dispersion also starting to roll over as well.
Last week if you remember we suggested a possible break of 1.3000 which now has in fact occurred in GBPUSD. The move may well be in its early days and further weakness looks probable. EURGBP which has been giving off mixed signals in the past few weeks is still doing so and we continue to flirt on either side of LT support. EURGBP risk reversal as you would expect has now flipped back bid for EUR calls over.
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