LONG USD/JPY FOLLOWING SHARP DROP
Absolutely love this trade and while I am not sure whether it will work out or not, the intraday set-up could not be ignored. Despite the sharp intraday pullback, the overall structure remains largely consolidative, with the market being very well supported on dips towards and below 82.00. At current levels, we see this market in the process of carving out a major low, with the price trading just off record levels from 1995. Today’s price action has been absolutely wild, with the market initially surging well beyond 83.00 on news of an earthquake and tsunami in Japan, but then reversing violently intraday presumably on a broad based liquidation of higher yielding plays as safe haven flows dominated. However, as we have outlined above, we hardly classify the Yen as a safe-haven play despite these flows, and see the economy at risk for additional uncertainty while it attempts to recover. We have not received a lot of color on today’s natural disaster, but this type of event can only make things that much more difficult for the Japanese economy. We have already seen the impact from a natural disaster in recent weeks from New Zealand, and we therefore would be very wary of buying the Yen at current levels. Technically, nothing has really changed in the short-term and after the market collapsed towards 82.00 and doubled its daily average true range (“ATR”) to leave the hourly RSI also oversold, we were excited to pull the trigger on the long position. POSITION: LONG @82.15 FOR AN OPEN OBJECTIVE; STOP 80.65.
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