Japanese Yen Likely To Range, Along With Canadian Dollar

Euro implieds ticked slightly higher in the longer term, but remained relatively lower compared to earlier levels. Previously priced in at 5.45 percent, the longer term component is now trading at 5.6 percent, with the spread slightly wider to the positive side, at 15 basis points.

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EURUSD


Euro implieds ticked slightly higher in the longer term, but remained relatively lower compared to earlier levels. Previously priced in at 5.45 percent, the longer term component is now trading at 5.6 percent, with the spread slightly wider to the positive side, at 15 basis points. The underlying volatility is surprisingly unaffected as the currency contested the record 1.3665 high over the course of the week, leaving suggestions still in breakout indications. At this point, with the record high still in focus, a modest failure or spontaneous break above would be need in order to spark a revival in the implieds.

GBPUSD


Sterling implieds continued to flatline during the course of the week. Previously priced in at 5.9 percent, the longer term measure has increased slightly to 6 percent, as short term components rebounded during the week. Subsequently, this has brought the short-long differential back to the zero line, compared to last week’s 40 basis point drop. Incidentally, the underlying currency has been consolidating as economic data runs thin, purporting a lower event risk environment. However, with the impending Bank of England decision, a key bounce off of current support at 1.9900 would help to kickstart some activity. The last time such levels were reached on the volatilities, implieds surged ahead quickly as the currency rapidly depreciated last month.

USDJPY


Implieds continued to trickle lower during the course of the week, priced in at 7.05 percent against the 7.25 percent seen last week in the longer term component. Short terms have increased, taking the differential higher to 35 basis points wide, compared with just a mere 15 last week. The wider spread is reflective of the recent action that has been taking place, regardless of the absence of real market attendance and liquidity throughout the week. Subsequently, the 120 figure comes into heavy play, with many expecting a slightly pickup when Asian traders return from the Golden Week holiday.

USDCAD


Canadian Dollar vols jumped to levels not seen in a while last week as technical levels and fundamental impetus took the underlying currency pair lower. Now trading at an incredible 1.1072, consolidation may be the story following the recent runup by the Canadian dollar. Longer terms seem to be paring back after trading as high as 6.5 percent, currently at 6.38 percent. Short term implieds have also taken a back seat, showing only 7 basis points wide compared to last week’s 32… As a result, with the price action already consolidating, the range environment is likely to remain. However, vols would be reinvigorated following continuation through 1.1050.

AUDUSD


Australian dollar volatilities bounced back slightly to trade at 8.5 percent compared to last week’s 7.7 percent longer term component. With central bank rate risk in the air, short term implieds additionally perked up as the currency pair approached the 0.8250 figure to the downside, lending a boost to the short-long differential. Now, the spread is trading 55 basis points wide compared to 30 in the previous week. Although suggestive of a more neutral and ranging environment, the currency’s implieds may in fact jump once again as the underyling pair’s price action is forming a favorable flag formation. As a result, a noted break above the 0.8300 would set in motion an unsurprising spike back up to 8.6 percent in the longer term component.