Daily Observations: December 17, 2012

DailyFX

Current Positions:

- Short AUDJPY from 88.83, Stop at 89.20, Target 1 at 87.60

- Long EURCHF from 1.2018, Stop at 1.1990, Target 1 at 1.2500, Target 2 at 1.2750

- Short EURJPY from 111.10, Stop at 111.20, Target 1 at 109.75, Target 2 at 108.60

- Short USDJPY from 84.15, Stop at 84.35, Target 1 at 83.50, Target 2 at 83.20

Recently Closed Positions:

- Exited Short AUDUSD (3/4) from 1.0582 at entry for 0.0-pips

- Exited Short EURUSD from 1.3103 at 1.3130 for -27-pips

- Closed Long USDJPY from 80.65 (1/2) at 84.15 for +350-pips

Time Frame: 1-day to 1-week

If you were following me in the Real Time News feed yesterday when markets reopened, I was advocating Yen strength following the election, at least for a few days, for a few reasons. First, a major event like this with a respectable rally ahead of it, to me, screams 'buy the rumor, sell the news.' Second, the AUDJPY, EURJPY, and USDJPY had all traded into areas of former highs; there's little reason to believe that major technical levels would be revisited without buying/selling interest returning to the market. Finally, and perhaps most important, net non-commercial futures positions show that the market is the most short the Japanese Yen since July 2007. In sum, looking for a rebound in the Yen ahead of the Bank of Japan's meetings this week offers an interesting set of circumstances.

Considering the momentum behind the Yen's depreciation, these trades are very short-term in nature, and accordingly, I am keeping my Stops very, very close on these positions. I will be looking to move the Stops up to the various entries in order to keep these trades risk free, just in case of unforeseen Yen weakness, despite the conditions listed above.

Any other trade ideas and general macroeconomic musings can be found in the Real Time Newsfeed, or by following me on twitter @CVecchioFX.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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