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New USD/JPY Big Trade Order 02.24.2016- CANCELED
Place Order to BUY USD/JPY at 110.85 Stop 108.85
USD/JPY is becoming grossly oversold and there are good reasons to think that it may bounce hard very soon. Here is why we like the trade:
1. Yield Spreads – the difference between 10 yrs UST and 10 yrs JGBs is far out of whack relative to the USD/JPY pair. US instruments are yielding historically far more in spread than the current exchange rate implies and US yields see any sort of rally the pair should pop.
2.Japanese corporates are way under water in their hedges (set at 115.00) and BOJ simply cannot afford to let the exchange rate slip any lower or it will risk a profit recession for the key exporting sector.
3.Speculative positioning is extremely stretched and BOJ loves to punish the spec at their most vulnerable point.
Therefore chance of intervention are increasing rapidly at these levels and we want to postion ourselves to be on the side of the central bank