Market Analysis

Dollar/Yen: Large Option Expiries Mooted

Traders who look at dollar/yen (USDJPY) may have to be a little patient in the next 48 hours if hoping for a break out from recent ranges. Admittedly, there is some broader event risk for the currency markets from speeches that will be made on Thursday. For example,  Fed governor Jerome Powell (who’s also a contender to be the next Fed chair) will speak in Washington on Thursday at 1030h local time (1430GMT) while his fellow-governor Lael Brainard speaks at another event in the same city at the same time.

But traders may also wish to take into account that there are a plethora of option expiries in dollar/yen which may continue to keep the pair constrained. On Thursday at the London cut (1400GMT, 1500h London time) ThomsonReuters IFR have identified USD1.79 billion of expiries at 112.00, USD578 million at 112.25-35, USD1.2 billion at 112.40-50, almost USD1 billion at 112.55-65, USD311 million at 112.80-85 and almost USD2.7 billion at 113.00-05. As for Friday, TRIFR have additionally identified another USD2.57 billion of expiries in the 112.50-70 area and USD1.1 billion at 113.00. These are big numbers. An awareness of the existence of option expiries on this scale may at least hopefully help traders formulate their own views.

Written by Neal Kimberley, External Currency Analyst.