Societe Generale write “we are a lot closer to the end of the Fed tightening cycle than we were six months ago and waiting for the next step towards BoJ policy normalisation.”

• “USD/JPY Y150 is a major psychological barrier and the BoJ/MoF have played on that, but unless they back up their words with action, a break will see the barrier’s lack of substance exposed unless the BoJ has changed its YCC policy by then.”
• “Our economists expect the BoJ next hawkish tweak to come in January 2024.”
• “With spot peaking and implied vol. at the bottom, we see a lot of value in buying USD/JPY puts.”
• “We recommend the 4-month tenor to capture the 22-23 January BoJ meeting.”
• They recommend two trades as a result, buying the 4-month USD/JPY 141.50/140.00 put spread and buying the 4-month USD/JPY 142.00 put, with a knock-out at Y135.00