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30 Sep 2013
Yen short the best trade this week?
FXstreet.com (Barcelona) - An agitated 'risk-off' sentiment hit the markets at the Asian open - Italian political jitters and increased chance of a US government shutdown to blame -, one in which the Japanese Yen is detaching itself from domestic-driven affairs to instead be a slave of its old fashion 'risk-off' appeal.
The currency has been bid to the boots along interbank trade, and whether or not follow through is seen, it will very much dependent on a headline-by-headline basis, with the main focus on a possible US government shutdown, while not ignoring the fluid political situation out of Italy, where the government has lost crucial support and new elections may loom near.
Yen, trade of the week?
This week could potentially be one in which holding a Yen long position may yield a robust risk reward result should a series of events in the US unfold.
While the first Yen supportive event has already manifested - Republican-run US House voting to delay Obama care law -, which brings the operations of the US government into a (partial) standstill, what needs to happen next is that the non-agreeable posture by both political parties officially confirm the federal government shut down as of 12:01 a.m. on Tuesday.
The after that, how long it takes until a compromise is reached will be key. While a rare event that such political disaster goes without a temporary 'kick down the road' solution, this is not something new in Washington's political circus, with as many as 17 times happening in the past, with some being prolonged enough to make such Yen long idea a juicy one to consider.
This time, egos and stakes are running at very high levels in the US, a hint of how high the Yen can also run this week.
According to Adam Button, Editor at Forexlive: "Buy the yen on the chance of disaster. If the govt is shutdown for an extended period or the debt ceiling gets perilously close, the stock market will throw a fit and yen crosses will roll over." Button does not believe odds are high for a sustained disaster, yet acknowledges that "the payoff is big if it hits."
Button's recommendation is to keep a close eye on headlines early Monday and be ready at the Tokyo open. As per Adam's taste, his favorite play out of all Yen crosses would be a short in CAD/JPY. "There is a double-top for July and Sept and the 55-dma is about to break. If Washington goes sour, this pair could be at 92.50 in a hurry" Button said.
The currency has been bid to the boots along interbank trade, and whether or not follow through is seen, it will very much dependent on a headline-by-headline basis, with the main focus on a possible US government shutdown, while not ignoring the fluid political situation out of Italy, where the government has lost crucial support and new elections may loom near.
Yen, trade of the week?
This week could potentially be one in which holding a Yen long position may yield a robust risk reward result should a series of events in the US unfold.
While the first Yen supportive event has already manifested - Republican-run US House voting to delay Obama care law -, which brings the operations of the US government into a (partial) standstill, what needs to happen next is that the non-agreeable posture by both political parties officially confirm the federal government shut down as of 12:01 a.m. on Tuesday.
The after that, how long it takes until a compromise is reached will be key. While a rare event that such political disaster goes without a temporary 'kick down the road' solution, this is not something new in Washington's political circus, with as many as 17 times happening in the past, with some being prolonged enough to make such Yen long idea a juicy one to consider.
This time, egos and stakes are running at very high levels in the US, a hint of how high the Yen can also run this week.
According to Adam Button, Editor at Forexlive: "Buy the yen on the chance of disaster. If the govt is shutdown for an extended period or the debt ceiling gets perilously close, the stock market will throw a fit and yen crosses will roll over." Button does not believe odds are high for a sustained disaster, yet acknowledges that "the payoff is big if it hits."
Button's recommendation is to keep a close eye on headlines early Monday and be ready at the Tokyo open. As per Adam's taste, his favorite play out of all Yen crosses would be a short in CAD/JPY. "There is a double-top for July and Sept and the 55-dma is about to break. If Washington goes sour, this pair could be at 92.50 in a hurry" Button said.