USDJPY – This is the MACRO TRADE at the moment.

12.04.2021

During the REFLATION TRADE the Japanese Yen (JPY) was the most PUNISHED asset in markets, as it served as a FUNDING MECHANISM for leverage. Cross-JPY was the trade to have.

When we see CORRECTIVE WAVES, there is a natural UNWIND of that leverage, hence the price action we have seen recently in CROSS JPY.

Here is the chart of USDJPY, with one NOTABLE characteristic: A BEARISH ENGULFING CANDLE into SHORT TERM SUPPORT.

This is a call to action of sorts. If this gives way, and there is every indication that it will, the correct trade is to ADD TO THE POSITION. The new lot would have a STOP at what now would become RESISTANCE. We will trade it as a DIFFERENT LOT.

We are comfortably LONG JPY, so we want to see price action to VERIFY this thesis. Ideally, we see 1 day and an additional candle. We have the luxury of time in our side, since we are short and in the money. In addition, we know that if this breaks from here, the next support is 110.50, which is a nice move and it would represent a wonderful windfall PL wise.