As per our morning meeting we expect the trading activity to be subdued today, which is the reason why we concentrate on the most liquid market out there: the Forex. The basic idea, following the trade on the Yen we pointed out in this section in the past, is to look at various ways to replay the trade. Look at USDJPY for a test of the 81 handle, with small risk and a tight stop above weekly R3.
Some choice comments in Japan today around FX intervention are ineffective, with a possible move towards monetary policy similar to other countries. We are expecting a pull back in the USDJPY (and other yen crosses) given its over extended run. However, we maintain our Bullish outlook on the pair, looking for a move all the way to the 84 mark.
Or as an alternative, a few other pairs to consider, which might offer slightly better value. Our favorite of all these is the GBPJPY, which offers nice room before support, tight stops and some divergence in the form of a significant high on price but highs in RSI and stochastics are lower than the September peaks, which was some 200 to 300 pips lower price wise.
Looks like we could be seeing some short term tops and the potential for a retracement here.
Running a position with a tight stop on USDJPY and a GBPJPY trade is how we would play this.