Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
Federal Reserve Balance Sheet Reduction: Brookings Research Outlines Possible Path Forward 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
Gold is meant to be a ‘safe haven’ in uncertain times. Why is it crashing amid a war? 
US Gas Market Poised for Supercycle: Bernstein Analysts 
The four types of dementia most people don’t know exist 
2025 Market Outlook: Key January Events to Watch 
Trump's Iran War Speech Sparks Market Anxiety Over Extended Conflict 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
Energy Sector Outlook 2025: AI's Role and Market Dynamics 
Trump Tariffs Show Minimal Economic Impact but Boost Federal Revenue, Study Finds 
Urban studies: Doing research when every city is different 
Private Credit Under Pressure: Is a Slow-Motion Crisis Unfolding? 
The robust US dollar depreciation realized since mid-December seems to have been stopped for now and most recently the US currency was able to regain some lost ground again. There is only one currency in the G10 universe that did considerably well since early February and that is the Japanese yen. JPY’s outperformance for the past two weeks has been remarkable: JPY appreciated to the highest level in 5 months in nominal weighted terms.
If at all USDJPY is projected to slide towards 100 on following driving forces, the below options strategy is advocated on hedging grounds.
The factors that likely to drive further USDJPY weakness:
1) The global investors’ risk aversion heightens significantly,
2) The weak US economy dampens hopes for Fed hikes and leads broad USD weakness, and
3) The expectations for more hawkish than expected personnel change of the BoJ heighten.
Options trades recommendations:
The implied volatility of ATM contracts of USDJPY is trading at around 8.06% and 8.02% for 2w/2m tenors, as the positively skewed IVs of 2m tenors signify the hedging sentiments for the further downside risks over the period of time, this appears to be conducive for put option holders. Despite the positive shift in risk reversal numbers, the hedging sentiment for the bearish risks appears to be intact.
Thus, we advocate buying USDJPY 2w/2m put ratio back spread strikes 107.771/106.036 (2 lots), (vanilla: 0.75%, spot ref: 106.572). A 2:1 put back spread can be implemented by buying a number of puts at a higher strike and buying twice the number of puts at a lower strike.
The short leg with narrowed expiry likely to benefit time decay advantage which in turn reduces hedging cost on the long leg of OTM put.
The maximum loss for the put backspread is limited and is incurred when the underlying spot FX at expiration is at the strike price of the long puts purchased.
Currency Strength Index: FxWirePro's hourly USD spot index has shown -32 (which is bearish), while hourly JPY spot index was at -92 (bearish) while articulating at 07:37 GMT. For more details on the index, please refer below weblink:
http://www.fxwirepro.com/currencyindex.
FxWirePro launches Absolute Return Managed Program. For more details, visit:
