Long the US Dollar against the Japanese Yen
In truth, there's clear risk that the USDJPY could trade lower. Yet I view the potential downside as limited compared to fairly significant upside.
The USDJPY has traded on a virtual tick-for-tick correlation with the 2-year US Treasury Yield and any singificant bounces will have to wait for a shift in interest rate expectations. But the 2-year is already at incredible lows of 0.24 percent--there really isn't much further downside.
With that in mind I'll go long USDJPY against the 2012 low of ¥76 with initial targets starting at the ¥80 mark. This is a long-term trade, and obviously I need to make sure my entry price offers at least as much reward as risk. As such this trade is valid at ¥78 or below.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
To receive the Speculative Sentiment Index and other reports from this author via e-mail, send a message with subject line “Distribution List” to email@example.com ;
Contact David via Twitter at
Meet the DailyFX team in Las Vegas at the annual FXCM Traders Expo, November 2-4, 2012 at the Rio All Suite Hotel & Casino. For additional information regarding the schedule, workshops and accommodations, visit theFXCM Trading Expo website.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.