Monday, 1 July 2013

USDJPY short idea

Dollar/yen is now up 5% since the FOMC announcement on higher US yields and a stronger Nikkei. Currently trading 30 or so pips shy of the key 100 level, BUT there has been a notable divergence between the US10-JP10 yield spread. This is seen below.

UJ LHS vs US10JP10 spread RHS
with the 10yr spread at 158bps the UJ is priced at around 98, normally when these two diverge they tend to come together.

Therefore I'm shorting at market 99.75, TP down below 99 and a stop on close above 101

Another rational for this trade is the resistance of the 61.8% fib level as shown below, this comes in at 99.9 just below of the psych level that is 100.



Furthermore with Goldman Sachs NFP reading being dropped to 150k (median at 165k) I thought I'd list a few major institutions estimates and review them pre-NFP on any variations (if any)

BNP Paribas - 175k
Citi - 160k
Credit suisse - 150k
Deutsche bank - 145k
Goldman Sachs - 150k
Morgan Stanley - 165k
JP Morgan - 150k
Soc Gen - 175k
UBS - 155k

However with such a wide spread between these there is often a surprise between actual and estimated NFP as shown below

NFP surprise vs. Reuters poll

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