Strategy Video: Yen Crosses to Reconcile Volatility and Trend in 2015
• The Japanese Yen is the worst performing major for the third consecutive year
• An upgrade to the BoJ's open-ended stimulus program leveraged further gains from pairs like USDJPY
• I am a long-term bull on the Yen crosses, but the short-term carries severe risks for bulls
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The Yen is going to close out a third straight year as the worst performing FX 'major'. Both the Bank of Japan's (BoJ) monetary policy efforts and an appetite for higher return combined to drive USDJPY and the other crosses to multi-year highs. Through the medium to long-term (a year and beyond), both of those themes will likely drive the Japanese currency lower and these pairs higher. However, through a shorter time frame, the risks are far too high for me to maintain a buy-and-hold view. With financial and economic conditions shifting, the probability of a significant risk aversion move taking place is growing. In the event of a speculative deleverage, the Yen crosses will suffer alongside equities, high-yield ETFs and other 'riskier' market types. What cues should we look for to signal these financial winds and what pairs are best positioned? We discuss that in today's Strategy Video.
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