USDJPY Spot & Options On 3/18/19

TL;DR

Dollar Yen volatility is currently very low due to low option volatility levels, making it difficult for the currency pair to move significantly. Traders can take advantage of this by trading between the big figures. The upcoming FOMC meeting may influence market expectations, with the potential for a dovish message leading to a buying opportunity in dollar yen.

Transcript

good morning my name is Ryan little stone from Forex flow dot live this morning we're going to talk about dollar yen and a couple of factors that are playing in the market at the moment what we've got is the FOMC coming up this week and we're going to take a look at the the volatility levels which is affecting this pair at the moment so we start wi... Read More

Key Insights

• 😘 Dollar Yen volatility is at historically low levels, making it difficult for the currency pair to see significant movements.
• 😃 Trading between the big figures, such as the 112 and 111 levels, can be a strategy to take advantage of low volatility.
• ↩️ The FOMC meeting may provide trading opportunities, especially if expectations turn excessively dovish.
• ☠️ The US economy is currently strong, which makes drastic interest rate cuts unlikely.

Questions & Answers

Q: Why is the Dollar Yen market experiencing low volatility?

The Dollar Yen market is experiencing low volatility due to historically low option volatility levels, which indicate that there is little reason for the currency pair to move in a volatile manner.

Q: How can traders take advantage of the low volatility in the Dollar Yen market?

Traders can take advantage of the low volatility by trading between the big figures, such as selling around the 112 level and buying into the 111 area, as these levels tend to hold more strength during quiet markets.

Q: What is the significance of the upcoming FOMC meeting?

The upcoming FOMC meeting may influence market expectations, with chatter suggesting a dovish message from the FOMC. Traders are looking for signs that the FOMC might change their neutral stance, potentially leading to buying opportunities in dollar yen.

Q: What other factor should traders keep an eye on?

Traders should keep an eye on US Treasury yields, particularly the 10-year yields, as they can impact the strength of the dollar. A softness in US Treasury yields below 2.6% can put downward pressure on the dollar.

Summary & Key Takeaways

• Dollar Yen volatility is extremely low, indicated by the one-month at-the-money option volatility levels, which are at historically low levels of 5%.

• The currency pair has been trading in a tight range between 110 and 112, making it challenging to see a significant breakout in either direction.

• Traders can take advantage of the low volatility by trading between the big figures, such as selling around the 112 level and buying into the 111 area.