A Risky But Worthy Shot

  • Action taking in USDJPY
  • Playing Yen against SPX gains
  • Waiting on AUDNZD
  • Monitoring BOE event risk

BUSY MORNING - Sometimes it's just impossible to keep up with my own updates. It has been an exhausting Thursday already. But markets are moving and that's what we're here for. The big story has been USDJPY. The major pair has collapsed below the previous 2016 low, trading back to its lowest levels since August 2014. The price action has been dramatic to say the least, with the market reacting to the let down from the BOJ after the central bank failed to upgrade its easing bias. 

THE YEN - For many days now I have said I like the idea of buying an extreme dip in USDJPY nonetheless but have been waiting for an ideal entry point. While it's certainly a dangerous trade, the idea of buying into a market that is both fundamentally and technically undervalued is highly compelling. The trade may not work out, but it's definitely one to love and I have taken my shot early Thursday. I initially bought some at 104.39 and then added some more well below 104.00 to give me an average cost of 104.07. 

STRATEGY - So how am I playing this strategically? Well, I have gone ahead and put it against my SPX500 short. This isn't something I normally do, but it is an approach that makes good sense to me in this specific situation. And so, I have gone ahead and booked profit on my SPX500 short from 2115 for a nice gain and will be prepared to hold onto USDJPY with a maximum risk of the gains from the SPX500 short. I will manage as the day progresses but this max loss translates into an exit somewhere just ahead of 103.40. 

$USDJPY may not work out but that doesn't change the fact that it's a sweet setup. Via @joelkruger

GROWING PAINS - The only other position in play is AUDNZD. In what has become tradition for me with this trade, it is giving short-term headaches, before what I hope to be more of the same significant upside follow through. I have been adding to the core position below 1.0500 but will reduce some of this exposure if the market still wants to head lower. Otherwise, I am sitting back and waiting to see what happens with the BOE today. My view is the BOE will issue strong warnings about the risks of an EU exit, which could be enough to sway voters back to the remain side and help revive the Pound. 

Currency Pairs

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Monday Technical Overview

Here's a look at what's going on with our Euro trade into Monday.


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