BTW, the Yen is getting absolutely crushed once again all across the board. Does ET even know the Yen exists? I wonder sometimes. Anyway, the breakout continues.
I've been watching USD/JPY today. Do you have a daily A level that you're using for it? I'm very green with FX, but starting to pay more attention to it. I know domicile market is one of the biggest considerations as per Fish, but are there any standard primers that you can recommend Mav?
I have noted this myself in my very limited experience of following spreads. 3 cheers for writing it out clearly. You are good Mav.
Bingo. I will be going long usdjpy - hoping to get a price around 79. This move has been unthinkable over the last 1.5 yrs. From 2008 itself, usdjpy has been just going down and down. The breakout looks clean, and over the next few months won't surprise me if it touches 90 - but resistance would be huge there. Thinking of putting a stop below 78 - a retrace so hard would likely invalidate the trade.
Of all the Yen pairs, I think I like the CHF/JPY the best. I think CHF will outperform the dollar over the next year and the Swissy is a defensive currency. Meaning, the fact that it's breaking out on this risk rally is really impressive. If we get a sharp correction in equities, this baby is going to fly. In August, this pair spiked just shy of 109. Really, really like this trade.
If equities have a sharp correction (say 5-7%%), eurusd will fall say 5-7 big figures, add in some Europe and eurusd will fall 8-9 big figures. To maintain the peg, usdchf will move higher 5-7 big figures. In this scenario of equity correction, the chfjpy trade will most likely go against you, unless usdjpy moves to 90 by that time. For otherwise, you are basically saying that peg will not hold.
Well, for starters, I don't think 5% to 7% is a correction. To me a correction is 10% or greater. Next, I'm not even sure the Euro will fall that much against the dollar on an equity correction. I just think the Euro is too heavily shorted. In a sharp correction, USD/CHF will get crushed. Not sure why you think it will rally, it hasn't during the last 10 selloffs. And I'm not even sure what "peg" you are referring to. The only "peg" I was aware of was SNB was selling francs to support the Euro. I'm aware of no such action against the Yen.
yes correction is typically minimum of 10% agreed. Also agree that SNB is not taking any direct action against yen. The peg I am referring to is Eurchf peg only. Following is what I am saying. Long Chfjpy position is synthetic long Usdjpy and short Usdchf position. If Eurusd falls, to maintain the Eurchf peg, Usdchf will have to rise. You are synthetically short Usdchf, so you will take heat on that part. This heat will be balanced only if Usdjpy rallies hard, then the trade will be close to breakeven trade. In this scenario, you are better off taking a direct long in Usdjpy rather than long Chfjpy. However, if if Eurusd rallies up, then above scenario will not work. In this case, to maintain the peg, Usdchf will most likely go down or worst case will stay where it is (thus pushing up eurchf). In such a scenario you are better off going long Eurjpy instead of Chfjpy. So in both the above scenarios, you are better off taking short Jpy exposure through some other way rather than long Chfjpy position. The case of Usdchf going down during last 10 market corrections is not applicable here - because that was pre-peg world. Post-peg world, rules of game are different. Going forward, peg will 'force' usdchf to rally, it was by the way the reason why usdchf rallied from 0.71 to 0.95 last August. All ears if you can punch holes in my analysis above.