Trade view / 09 November 2012 at 8:41 GMT

Shorting USDJPY on risk aversion

Head of FX Strategy / Saxo Bank

A few points on this trade idea - see full PDF description below

The JPY is the strongest of the G-10 currencies as is often the case during bouts of risk aversion and particularly due to risk aversion. The move could continue if risk appetite remains off as the market has built quite a large short JPY position.

Technically, the move back below the 200-day moving average and the weekly Ichimoku cloud level (intraweek yesterday) appear to be bearish developments. A move below the Kijun line (blue line) could trigger further downside toward key retracement levels.

The USDJPY pair offers a lower volatility way to trade the JPY strength for the moment ahead of the weekend than other JPY pairs, which tend to be more volatile, allowing tighter definition of risk/reward.

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