Currency Options Roundup:Only the technical portfolio has been consistently long USD/JPY since late 2014, the pair has clear medium term momentum and trend persistence is the only variable in this framework.The macro portfolio has been both long and short the yen this year depending on the cyclical context and the cross-rate.Yen has been flat since mid march when traders took profits on several long USD positions in the wake of dovish Fed and see no reason to re-enter now given the lack of macro catalysts on either the US or Japanese side.The FX Derivatives recommendation would be long of cross-yen gamma, long 2M CAD/JPY and NZD/JPY versus USD/JPY straddles.Vols are partial mildly higher heading into a data packed payrolls week but risk-reward of chasing recent rallies is poor. Stay neutral directionally; own longer dated vol funded with shorter-expiry shorts.Larger Gamma means the Delta is more sensitive to a change in the underlying market price, which means a larger risk or reward.Cautious zone (123-125): As shown in the Greeks nutshell it is imperative that when exchange rate nears towards 125 levels the holder would be at risk as the delta pops up in huge positive numbers.Yen-denominated correlations perked up this week following the breakout in USD/JPY.The forecast still shows USD/JPY in the low to mid-125s for the next year, though subject to inevitable spikes around US economic and/or Fed optimism.
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