USD/JPY downside volatility is going to stay greater than EUR/USD downside volatility. Therefore, EUR/JPY downside volatility is likely to increase more.

The EUR/JPY is forming a triple bottom at 126, and bearish USD/JPY momentum is likely to trigger a break. If EUR/JPY stays within its channel, it should still be above 120 at end-June.

Please have a glance on ATM IVs and risk reversal table, as implied volatilities of EURUSD and USDJPY reduce for 3M, 6M and 1Y expiries the same is increasing in EURJPY with negative risk reversals.

We think that when this OTC hedging arrangements are coupled with the fear of broader global risks it appears to outweigh worries about further BoJ policy easing and euro summit likely to pose more risks in the months to come.

Given concerns on limits of the policy arsenal at the BoJ and rising euro-centric risks, we recommend initiating short EURJPY positions (even though it is a bit late mitigate EURJPY's downside risks, we could foresee further slumps), preferably via options ahead of the March and June ECB meetings, despite acknowledging the recent uptick in the implied volatility of JPY crosses.

Technically, our bearish view for EURJPY was encouraged by the break below 127.581 1st and now at 126.101, near the 2015 lows. The downtrend is moving in sloping channel with leading and lagging indicators are in convergence with this trend.

Go long in EUR/JPY 2M -0.48 delta put strike 125.500 (which is at the money), while shorting 1W EUR/JPY put strike 126 (ITM) as you can see the pair may show little bounce since it is nearing channel support, indicative offer: 0.50% (spot ref: 125.50 while articulating).

Stipulation is that in case 126 does not hit within next 1 week, the advised put spread has the same pay-off as the vanilla put alone but costs nearly five times less.

Appealingly, its cost is only a little more expensive than a standard put spread offering extremely poor leverage.

Unlike a naked put, however, the appearing put spread does not offer convexity before the expiry due to the sold option. No convexity and a risk limited to the premium make it a pure buy and-hold strategy.

If the barrier is hit before the expiry, investors nonetheless realize a small profit, nearly equal to the premium amount.