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USD/JPY - the perfect short
Jul 05 at 19:21
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Jul 05 at 19:21
why is it perfect? It's not because a 20 yen move is set to occur. It's not even because we have locked in a free trade ( short w/ calls), it's because interest rate differentials ( US points to cuts, Japan raises). There was a week of discussion about the FED raising rates due to increasing inflation, but NFP @57 k would most certainly not require raising rates. So, we have confirmed that rate diffs are narrowing which will be dollar neg and underpin yen strength. That's the fundamental set up. Now throw in the fact that Japan intervened back in may with 70B, so this time it must be much bigger. So, we got short based on call premiums and right now we can feel at ease that there will be no surprises with exit orders.
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