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USD/JPY Trading Strategy for the week 13 - 17 Jan 2014

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USD/JPY Chart 14 Jan 2014
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Looking to sell the US Dollar to the Japanese Yen

In this week’s trade we are delving into the depths of a pair that has experienced a tremendous amount of volatility during the past year. Yes, some of you are already guessing correctly that we are going to talk about something related to the Japanese Yen. This time our strategy session is related to the USD/JPY binary options forex pair.

Into the start of the week the Japanese counterpart has proved to be quite a force to be reckoned with due largely to the unfolding stock market rally. Some risk metrics related to the stock market released yesterday have caused a selloff of the broad indices by more than a full percentage point. The US dollar sold off against the Japanese Yen and marked a new low for 2014 at 102.85.

We are quite keen to obtain more information about the state of US earnings and this is what is going to happen during the rest of the week. The question that remains is whether the guidance will be storng enough to warrant a further rally in US stocks. As most of our readers know last year has been quite stellar in terms of stock market performance.

Why do we mention this, well for a very simple reason – the USDJPY is the most correlated pair to stock market rallies. It rises as long as the stock market rallies. Looking at the charts we can easily identify that some substantial gains for the Japanese currency are being consolidated at this point. We are looking to sell rallies on a daily basis and for now the key level that we have identified and really like to use for buying daily put options is 103.90.

The big data point today will be the release of Retail Sales numbers form the US. The time that we are looking forward to is 13:30 GMT when the next batch of economic data is warranted to move the market. Consensus estimates are for a rise by 0.1% in December, up by 0.4% excluding the volatile Autos component.

Stay tuned for more information to our topic and we will share our revised opinion as soon as we see a changing market. For now we would not be looking to buy calls at any level, but we stay flexible as this is a very key metric to remain on top of the binary options market. Have fun trading!

Comments

Matt T.'s picture

Our trade is still on with the pair hovering around same levels from last night. It seems that activity for now is subdued as a major move is not very likely particularly in this pair tonight. The main support level stand still at yesterdays low at 104.15 while on the upside we have speed-bumps at 104.48 and 104.92. Any break of the range to the downside could trash our trade, so we wouldn't take additional risks for now. Only a break of 104 would make us buy weekly puts for next week. Happy trading and stay tuned to our weekly strategy sessions.USD/JPY Chart 17 Jan 2014

Matt T.
Matt T.'s picture

The pair has been consolidating its losses during the US session and is now trading around 104.30. We have booked a profit on our trade last night and tonight we shall make another go at the same trade. We would be buying daily calls for today and tomorrow at current levels. Following a test just above 104.90 the pair has given back all of its gains. The belive that underlying positioning and fundamentals favor the USD to go higher and retest levels around 104.90-105. Alternatively if we drop below 104 we would be reversing our call to buying daily puts.USD/JPY Chart 16 Jan 2014

Matt T.
fxZero's picture

Do you know any good broker which offers daily calls?

fxZero
Matt T.'s picture

The USD rally has taken a new breather and we feel obliged to reverse our position as of right now. We are buying calls for a daily expiration today and tomorrow. The sharp reversal of fortunes has been triggered by the relentless commitment by Federal Reserve officials to keep removing monetary stimulus from the system. Fed officials last night have commented that the central bank should purchase less treasuries and mortgage backed securities and ultimately get out of the market. Buying daily calls at current levels just below 104.50.USD/JPY Chart 15 Jan 2014

Matt T.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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