Facts:
- The USDJPY pair is currently holding within a structure of important support at the 150.00 level
- Despite the Fed’s constructed narrative, the swap market is pricing in a faster path for US interest rates, causing the spread between the implied US/Japan rate change to drop significantly
- This market picture could cause the market to further deleverage from long positions on the pair and potentially drive the overall downward trend on the pair
Trade: short position at market price
TP: 146.930
SL: 152.540
Justification:
The USDJPY pair is currently holding within a structure of important support at the 150.00 level. Despite the narrative built up by the Fed about the possibility of keeping rates unchanged in the future, the swap market is pricing a faster path for US interest rates in cumulative terms, causing the spread between the implied US/Japan rate change to drop significantly. It is worth mentioning that in the past, the pair’s rate has remained in a range between 152.540 and 146.930 with similar spread values. With these conclusions in mind, we recommend taking a short position on the pair at the market price and the take profit and stop loss prices shown above. However, traders are advised to exercise extreme caution, as the pair may see a spike in volatility tomorrow in the face of scheduled NFP data from the US. The overtones of these data could significantly change the market picture seen today.
