I'm also beginning to wonder if 10 year JGB yields might revisit a zero handle again. They got down as low as 50-70bps a couple of times in the past, 1998 and 2003. Seems crazy I know, but the recent range in JGBs is coiled super tight (Futures range about 70 ticks since beginning of May) so whichever way price breaks I guess we might get a powerful move. Obviously I am biased towards JGBs breaking higher, consistent with the long JPY view. A JGB rally would probably also screw over a lot of folk, there's bound to be a group of traders that see the rising bond yields in Greece and high debt to GDP ratio, and then make the flawed parallel argument in Japan. The major flaw in the argument being that 95% of JGB issuance is financed by the Japanese...and rising contagion effects makes them more likely to buy JGBs, not less likely. And the great thing about buying JGBS here is you have nice stop placement (below bottom of the recent range)...i.e. good R/R
benwm, how confident are you that you have the direction correct? JPY looks to be headed towards 81 now against USD.
I would say "7/10" confident. I'm slightly offside having originally shorted USD.JPY around 80.50 area. Yesterday's USD.JPY rally to 81 in London time was more a case of overwhelming USD strength than anything else, I felt. There would need to be a succession of weak yen days for me to think I've got this one wrong. It makes sense that the 80 handle would "put up a fight", given its significance. If anything such head fakes might result in any subsequent decline in USD.JPY being more brutal because it has given the shorts some false hope, perhaps sucked in some new short plays. The longer we spend in 80-81 the more I suspect shorts are adding in the expectation of Mof/BoJ intervention. Do it sound like I'm talking my own book?!
To clarify, I am referring to yen shorts here when I say "shorts" - looked ambiguous when I read it back after posting
Not really. You seem to be pretty calm. I would be furious if I flipped from short to long only to see price action once again move against my position. ps: That's why I seem angry a lot.
Ideally I would like to see JGBs break up to power the yen rally. Currently Sep11 JGB futures are hovering aroun 141.00 handle at the top of range I talked about. I did buy some JGB 142 strike call options last week at 0.04, doubled up yesterday at 0.01 after the futures weakness and took off today at 0.04. So that paid for the yen loss. I never double up with my day trades but for longer term macro view and options I can't resist the temptation. Not really in the Trading 101 manual I suppose...
I think sometimes you have to display a poker face, even in trading. Life too, I guess. Put it this way, I'm not going to stop and reverse a second time. I hate doing it. But I won't regret losing money having bought yen here because it makes sense to me. If 80 breaks, it will become easier. When I stop and reverse impulsively (less frequently these days) it never works...when I consider something for longer, pause, re-assess, work everything out in my own mind, it works better. I say "stop and reverse"..it was more like stop out, revaluate, sleep on it, then reverse in this instance.
One weakness of mine is being "too early" (that's what my wife says anyway!).. if you check this thread in one weeks time you'll probably see I was right with the call but I gave myself unneccesary heat. Hopefully I still have a position at that point and made some money... LOL