FXStreet (Bali) - One of the reasons USD/JPY has taken such a directional bullish move post ECB is the fact that the option market was quite short volatility in recent weeks, which is predominately characterized by the sale of calls/puts.
The selling of calls/puts is effectively done to adjust the implied volatility curve vs the historical, as the market has much higher expectations of volatility rising vs the actual volatility being shown in the charts, which refers to historical (usually measured by the last 20-periods).
The current positioning of the options market meant that a break through key upside levels above 120.00, would most likely see option players hedging short call/puts by buying the underlying USD/JPY and fueling the trend further.
The resilient rise in the S&P500, which ended up by 32 points, and expectations for the ECB to flood the market with further easy money (via QE extension as soon as December), were the catalyst that initiated the upward pressure in the first place.
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