1. FX Outlook
  2. FX Options Weekly

Macro and Vol Commentary

CHF and JPY, two currencies that traditionally benefit from times of instability, were swayed by banking sector turmoil, exacerbated by problems at Credit Suisse. With lingering uncertainty from the economic and financial sectors, what is the outlook for these currencies as safe havens?


  • The economy failed to grow in Q4’22, flat Q/Q, as manufacturing and exports weighed on momentum.
    • Still, the SNB sees the economy expanding by 1.0% in 2023, down from 2.1% in 2022, given robust private consumption and a tight labour market.
  • The takeover of Credit Suisse by UBS has helped avert severe consequences for national and international financial stability and Swiss economic performance.
  • However, the risks are not over yet, and we continue to see ripple effects lingering through the markets.
  • The Swiss National Bank increased the interest rates by 50bps despite the recent turmoil triggering the stability of the central bank and, subsequently, the entire banking complex.
  • The bank stated that more hikes are to come as it continues to battle inflation in the economy.
    • While CPI growth in Switzerland is less than half of the overall Eurozone’s, it remains at historically elevated levels of 3.4%, and an unexpected increase in February prompted heightened concerns by officials.
    • With the labour market showing no signs of abating, wage concerns are also becoming more prevalent.
    • The price concerns outweigh the immediate consequences of the banking fallout, and we maintain our view of further tightening from the SNB.
  • The increase was in line with the ECB, which also hiked the interest rates by 50bps in recent weeks, and the markets now anticipate another 25bps in June, vs 25bps from the ECB.
  • These moves could prop up the franc, and given the recent calmness in the banking sector, it could test the 1.10 against the dollar soon.


  • In line with Switzerland, Japan managed to avoid a recession, growing by 0.1% annualised rate in Q4’22.
  • The return of tourism has been a bright spot for the economy in recent months, helping to support the yen into the new year. Since then, the sentiment has weakened slightly, and the monetary policy outlook has come to the forefront of market assessment.
    • Activity in Japan’s service sector strengthened to the strongest level in almost a decade in March, at 54.2, as the return of tourism boosted demand.
  • However, exports remain sluggish, falling by 3.5% m/m in January.
    • This further translates into manufacturing performance, which saw confidence deteriorate to a 2-year low.
  • Still, continued normalisation due to lifted lockdown measures should help support growth in 2023.
  • Inflation slowed for the first time in over a year, down to 3.1% y/y.
    • Core, however, continued to edge higher, rising at the fastest pace in over four decades, pointing to quickening price strength.
  • Renewed worries about a US recession and easing expectations for rate hikes by the BOJ contributed to a stock selloff in recent weeks.
  • From the monetary policy perspective, since last year, markets have been betting on BOJ to give up its ultra-loose monetary policy as inflation gathered pace. The CB had to boost bond purchases to defend yield-curve control, leaving the debt market with insufficient liquidity.
    • As a result, Japanese rates have climbed due to pressure from global rates.
    • Still, the BOJ kept the policy unchanged in March, and Ueda is set on maintaining monetary easing to sustain the economy for now.
    • Since Ueda might take some time before policy moves, JPY has room to fall further.

Both currencies have seen their moves diverge in recent weeks; while CHF gained some momentum from a 50bps hike from SNB, the yen continued to soften, given little change on the monetary policy front. Part of the yen’s move is driven by softening expectations for the BOJ, and part is an increase in bets on US tightening. While we do not see the end of safe haven properties for these currencies, economic and financial outlooks are set to cloud the currency view, especially at times of high volatility. In particular, we expect the dollar to remain supported above 100, given the robust economic background in the US, and that should continue to weigh on other currencies in the longer term. Given that Switzerland is in a much better shape to take the hit of another shock and tighten monetary policy in the near term, our view is of CHFJPY strength, supported above 145.

Sources: S&P Global, Ministry of Finance Japan, Economic and Social Research Institute Japan, Bank of Japan, State Secretariat for Economic Affairs, Federal Statistics Office of Switzerland 

Volatility Commentary

Month end March, Realised vol finished above implied by almost 4 VOLS, a significant move in comparison to previous months, where IV was priced in higher throughout January and February. Looking at historical data, we notice that CHFJPY is a mean reverting process, we see a clear trend of realised finishing higher than implied by a significant margin then reverting back lower and this cycle continues throughout. At the start of April -May 2022, we saw a very wide difference between RVol and IV, similarly between Aug-Sep 2022 and Dec-Feb 2023.

We can safely assume that regime shifts in volatility for CHFJPY is a common pattern and since we are now entering a regime of higher vol, we are betting that this pattern will continue in the next 2-3 months. The trade idea is to buy EKO call option to capture some of the upside move and finance it by selling a vanilla put. Your biggest risk in this trade is if CHFJPY moves down aggressively, hence for protection we will buy an OTM put option to cover this risk.

So overall, this trade will give you exposure to the upside, protection if price moves down aggressively and using the sell of the put to finance the trade.

CHFJPY 1-month Realised vs Implied Volatility

Realised Vs Implied (12)

CHFJPY Trade Idea

  • Buy EKO Call, strike 145.5, barrier KO at 151.
  • Sell Vanilla Put, strike 145.5
  • Buy Vanilla Put, strike 142
  • Expiry 3months 10/07/2023
  • Notional for each leg: 10mio CHF
  • This structure receives circa 40k CHF, spot ref 145.00

Positioning Charts

USDBRL NDO Positioning Data 21/03/2023 - 28/03/2023

USDBRL option positioning saw the range edge slightly lower, with the majority of near-term expiries taking place between 4.90-5.20 in the week ending April 4th. The upside cover remained wide, stretching out to 5.60, with the notional side for calls being quite large. This suggests that there is an appetite for higher levels, and if the pair breaches the 5.20 level, we could see some strong upside in the near term. At the same time, some of the expiries down the curve have been brought forward, and we expect increasing momentum on the upside in the near term. For that, the pair must breach the 5.20 level.

Usd Brl 21 28 (4)

USDBRL NDO Positioning Data 28/03/2023 - 04/04/2023

Usd Brl 28 4 (2)

USDCNY Vanilla Positioning Data 21/03/2023 - 28/03/2023

USDCNY's positioning remained broadly unchanged in the week ending April 4th but saw near-term expiries tightened into the 6.85-6.95 range before widening out further down the curve. The notional size of calls in late April is seen growing; however upside cover remains limited, suggesting that markets remain unsure about the direction of the move. We expect the pair to remain broadly range-bound in the coming weeks.

Usd Cny 21 28 (4)

USDCNY Vanilla Positioning Data 28/03/2023 - 04/04/2023

Usd Cny 28 4 (2)

CHFJPY Vanilla Positioning Data 04/02/2023 -04/03/2023

Appetite for CHFJPY grew sharply in the month ending April 4th, with both the size and the number of puts and calls growing. Both upside and downside covers have been extended to 155 and 130, respectively, but the number of puts is slightly greater, especially further the curve. A few big calls are expiring this week at 150; however, following that, we expect momentum to shift on the downside.

Chfjpy Feb Mar

CHFJPY Vanilla Positioning Data 04/03/2023 - 04/04/2023

Chf Jpy Mar Apr

Charts and Tables

FX Expiries

Expiry (43)

Historical Spot FX Volatility (30D Rolling)

Chart (37)

FX Matrix (today)

Spot (95)

Weekly Change

 Week (76)

Key Events & Releases

Calendar (108)

Technical Charts

JP Morgan Global FX Volatility 


The index continued to soften in recent days, but support at 10.17 held firm and the index is now seen edging back to 10.30. At the same time, a breach of longer-term moving averages highlights the downside conviction in recent days. The indicators point to the index struggling back above the moving average levels, with %K/%D about to converge on the downside whilst overbought, and the MACD is positive and flat as recent upside pressures are subsiding. To confirm the acceleration of the downside trend, the index needs to break back below the 10.17 level before testing 10.00 once again. Alternatively, if the index was to break back above the 200 MA at 10.43 level, we could see levels retest at 10.52 and 10.74, the 50 and 100 Mas. The indicators point to a build-up of downside momentum in the near term, and we expect the index to remain capped by moving averages.

Dollar Index 


The index continued to soften in recent weeks but found support at 101.45 and has traded slightly above it since. The indicators, however, point to a weakening upside momentum: the %K/%D is seen converging on the downside in overbought. MACD diff is positive and is about to converge on the downside, suggesting a strong conviction for lower levels. To suggest this momentum, the index first needs to break below the 101.40 level. A break below this level could signal further downside to 101 before 100.82, the February low. Alternatively, if trend resistance does not hold, a breach of this level could set the scene for moving averages at 102.30 and 102.88, respectively. We expect some moderate downside in the near term but for the recent lows to cap any strong momentum.



The pair softened in recent days after testing resistance around 146; for now, this level is holding firm, but stochastics point to a sharp trend reversal in the near term. The %K/%D has converged on the upside and is now rising sharply, leaving the oversold. The MACD diff is negative and converging. Prices would first need to break above 145 to suggest the trend reversal above 146. This could set the scene for 147 and 147.56, March highs. Alternatively, if the moving average level at 144.50 is broken below, we could see the pair test the 144 level before 143. The indicators point to a sharp trend reversal in the near term, and to confirm the longer-term upside trend, the pair needs to confirm support above moving averages.



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