On the verge of more easing likelihood from central banks like ECB and BoJ, this is revolving into realized vol generators and liquidity declines seasonally into year-end.
As a result, you can observe the same into ATM volatility nutshell, EURJPY to perceive the highest IV amongst the G7 pool.
Adding to the mix Thursday's ECB hint at additional QE, Friday's PBoC rate cut and next week's possible upsizing of BoJ QQE would undoubtedly affix the impetus their currencies.
We recommend EUR shorts vs. PLN outright and vs. RUB via put spreads.
We hold UW EM FX, as we still see distinctive risks dominating on a higher likelihood of DM stimuli (ECB and BoJ), PBoC easing and USD/CNY stability through year-end.
In recent updates on delta risk reversal of USDJPY ATM contracts, it is understood that the ATM calls have been on high demand (this is just the resultant sentiments from recent rallies) and looks overpriced which divulges the positive market sentiments for USD/JPY pair.
Buy USD/JPY ITM (116.127) 0.5 delta call with longer expiry (let's say 1m tenor). Sell two lots of OTM strike calls (124.275). Thereby, we've formulated the strategy so as to suit the delta risk reversal.


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