Capitalize on minor upswings in short run for shorts side, keep longs for certain bearish trend to prevail in medium term:

We could foresee Yen's continued gains against dollar in medium term perspectives (let's say next 1-2 months or so) even though some minor upswings in short run cannot ruled out but not beyond 118.854 from current levels considering global economic slowdown and mixed bag of US markets.

Forecasters are losing faith in JPY weakness and for the first time in at least five years, consensus forecasts are not calling USD/JPY higher, with both Bloomberg's and Reuters' analyst surveys now showing a profile essentially flat at spot.

For us, it would be in narrow range of 125.959 - 116.0.82 but slightly bearish bias, the 25-delta risk reversals of USDJPY are at the highest negative figures among entire G20 currency space for next 1w-1m or so, but it is reckoned that any abrupt upswings in short run could be exploited for shorts.

This would mean that market sentiments for this pair have been bearish in medium term despite eyeing on any abrupt upswings for shorting opportunities and the market sentiments in medium run for dollar have been weaker against this pair. As a result, we reckon that for next month Yen may pretty much gain.

It is also observed that ATM contacts of USDJPY have gradually increased implied volatilities after the much awaited fed's meet has delivered that was in line with markets expectation, we did not see much of rate policy impact that could have propped up dollar's strength. We believe it was already priced in even before this event.

The delta risk reversal for the pair is still on higher negative values among entire G7 currency space for next 1w-1m expiries, but we believe some short upswings may be utilized for shorts..

The pair ranks among top 3 and is likely to perceive higher implied volatility at around 10% of 1w-1m ATM contracts that has increased from last week's 8.75%, thus we recommend holding longs on put ladder spreads that contained proportionately less number of shorts and more longs which would take care of potential slumps on this pair in long run and significantly higher volatility times.

So, shorting ITM put with shorter expiry (lets 1w contracts) would fetch certain yields as a receipt of initial premiums (see daily price actions and you had shorts on ITM puts) and hold 2 lots of ATM and OTM put with longer expiry since implied volatility is inching lower which is good for option holders.