JPY crosses/USD/JPY

Yen: Is it better to be long or short heading into risk events?

If we don’t know the answer to this question then we should probably be square or have small positions and that leaves us able to react better to whatever happens:

  • The Japanese opposition LDP looks set to easily win the upcoming general election and their leader has publicly stated that he will rein in the BOJ neutrality and insist on more measures to combat deflation- Yen bearish of course:
  • But recent reports put Yen shorts already at extreme levels- Yen bullish as the market will need to start short-covering:
  • Fresh easing measures from the Fed would be risk friendly, and should underpin the Yen crosses- Yen bearish
  • But again, the market might already be positioned for this event?

I’d say we should keep positions small and be able to jump in once the market gets over-stretched, which is certain to happen.

Look for the 81.70/82.80 range in USD/JPY to break and that should be good for a 100 pip move minimum. Stay small long near the range base and stay small short near the base top, and be ready to react once the moves start.

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