USDJPY: FADE SHORT ON RALLIES; BUY 104.1 BREAKOUT
Updated
Yen
- There is little impetus for this pair this week, with this recent rally likely part of the NFP report flushing out.
- Nonetheless from here I maintain my bearish bias given the BOJ and JPN govts massive let downs I think USDJPY topside will struggle and we will move through 100 once the risk-off tone returns (which is likely once the equities rally/ excitement fades... and still waiting); thus, short on rallies into key resistance levels e.g. 102.5, 103.3 is advised.
- However, between the 103.3 and 104.1 level there seems to be an area of "No mans land" which is filled with contradictory bullish/ bearish signals thus i advise not trading the pair between this range.
- Furthermore a break above 104 and close on the daily and my view turns to bullish - citing the relative lows e.g. yen already 20% down so struggling to fall more or a medium term risk-on shift maintaining thus driving the pair higher through weaker yen demand.
Trading strategy:
1. Sell yen at 102.5 resistance, 101.6tp1 101tp2.
2. PotentiallY buy yen on a 104.1 break-out but I will advise on this if it becomes the case.
- There is little impetus for this pair this week, with this recent rally likely part of the NFP report flushing out.
- Nonetheless from here I maintain my bearish bias given the BOJ and JPN govts massive let downs I think USDJPY topside will struggle and we will move through 100 once the risk-off tone returns (which is likely once the equities rally/ excitement fades... and still waiting); thus, short on rallies into key resistance levels e.g. 102.5, 103.3 is advised.
- However, between the 103.3 and 104.1 level there seems to be an area of "No mans land" which is filled with contradictory bullish/ bearish signals thus i advise not trading the pair between this range.
- Furthermore a break above 104 and close on the daily and my view turns to bullish - citing the relative lows e.g. yen already 20% down so struggling to fall more or a medium term risk-on shift maintaining thus driving the pair higher through weaker yen demand.
Trading strategy:
1. Sell yen at 102.5 resistance, 101.6tp1 101tp2.
2. PotentiallY buy yen on a 104.1 break-out but I will advise on this if it becomes the case.
Note
1. On the volatility side we are seeing some bullish/ neutral interest - USDJPY 102.00 (USD 825m) 104.00 (570m) 104.50 (348m). though volume is quite low but is nonetheless bullish/ neutral, with the 104 and 104.5 strike gambles as expected above e.g. 104 breakout likely to make more Yen buying.2. The 25D RR are trading flat at +0.1 vol, though we see -0.6 on the 1wks. perhaps indicating directional conviction on the pair is low the market. 1ms offer more conviction at -1.3, which is inline with my view and likely is pricing the fade of the risk-on sentiment occuring at somepoint in the next month leading to yen selling (yen buying) as risk-off reasserts itself.
Note
UPDATE:1. Daily lower confirmation - this signals the risk-on/ uncertain bids should have been flushed out at the 102.5 pivot and now bulls should take over and move us to lower lows e.g. 100.1 should be tested on this extension lower at least.
2. Gold and other safe havens are trading well however correlation between risk and safe haven is low, we need to see a strong negative correlation reassert itself before conviction grows for yen lower and into the 94-6 range e.g. 2/3 consecutive days lower for SP, and USDJPY and 3 days higher for Gold would be a signal that the risk-off trend is back - given the BOJ miss and the sustained equity topside amidst US political uncertainty and falling Chinese CPI (one measure that the credit boom is starting to drag on the economy - though taken with a pinch of salt relative to last years levels) , we should see a 10% pull-back on the major indicies soon,
- Given new highs i am very interested in taking risk on this equities pull back (normally long only) - so keep a look out for my SPX/ FTSE 10% sell signal.
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