Which Yen Pair To Trade?

Bank Of Japan BOJ is meeting on Thursday and Friday. A big move is anticipated by the market with yen implied volatility at highs. Which pair will offer the most trading opportunity? USDJPY, GBPJPY or EURJPY

Bank of Japan has their meeting Thursday and Friday upcoming of this week. I’m just sitting here doing some analysis on the major Yen pairs thinking, how am I going to trade that if we get a surprise move?

Now, volatility for the Yen is at the highest for the year, well it’s close to the highest of the year so far. So traders are protecting themselves or expecting a big move on the Yen. So what are the three options we’ve got that we could trade?

We could trade the USD / Yen, of course. We could trade the Euro/Yen, another big one or we could trade the GBP/Yen. There are other pairs out there, but I’m just sticking with these three for now.

How am I going to position? Well, you know what, I’m not going to predict what Bank of Japan are going to do. They have loads of fundamental analysts out there who are predicting one thing or the other. Don’t’ care, not interested. What I am interested to do is put together a little bit of a blue print for how I’m going to position if there is an opportunity. If there’s no opportunity, we’ll pass. There’s loads of opportunities upcoming in the next week, the next month, the next year, it doesn’t matter. But what is my plan?

Well, the way I’m looking at it is this… The GBP/Yen is the weakest of the bunch. Now obviously that is because it’s affected by the Pound as well as the Yen, but let’s just look at it from a technical perspective.

I’ve just drawn a little retracement tool here. I’ve not used Fib, you can use it, doesn’t matter, I just like to bracket it in terms of quarters. And we haven’t pulled back half of the surprise move of the Brexit lower. So to me, this is the weakest chart out there. Let’s put the reasons aside, let’s put the other side of the pair to one side for now, I’m just going to look at it purely from a technical perspective.

If we look at the USD/Yen however, we can see that we are pushed above that Brexit high and we’re actually starting to do some work in the May / June lows. So it’s a stronger chart, we’ve rallied up above 100, 600 ticks up. To me, again, purely from technical perspective, this is a stronger chart.

Now, I know we have got a few days coming up and I’m not sure actually when this video is going to get uploaded, but we’ve got a few days coming up until the meeting so this could all change. However, as it stands, if we get a surprise move to the upside, I’m going to then look to buy pull backs on the USD/Yen. If we get a surprise move on the downside, I’m going to look to sell pull backs on the GBP/Yen. Purely because the GBP/Yen is the weakest chart and the USD/Yen is the strongest chart. Just from the chart perspective. So we are going to move down to the downside, some sort of pull back, maybe let’s just see if it closes and we get a good solid down move, something comes out and we get a big move and we’ve got to close at the lows, and then next they look for that sort of retracement trade, hit that short, look for a test of the lows, maybe take out the final lows. That will be my play if I’m playing the pairs from the short side, I would probably look at the GBP/Yen. If I’m playing it from the long side, so if we get a surprise move to the upside across the charts, then I will probably look to the USD/Yen, that surprise move to the upside, a close at highs, a little bit of a pull back maybe the next day, overnight drift and then look for a long for a revisit to highs. Something along those lines.

A look to finesse that trade and plan that a little more detailed if we get the event, but just starting to put a broad blueprint in place, some broad boundaries for how, and maybe look to position if we get the surprise move and at least then when you’ve got that you can then start to drill down and then finally cement your trigger if you like, if and when you get that surprise move.

We may not get it, we may get choppiness, these charts may change as we come up to Thursday, but as it stands at the moment, that’s the way I’m going to look at it. For me it’s always been a good way of looking at things; what’s the weakest, what’s the strongest from a chart perspective, purely looking at it from a technical point of view and then framing your trade around that.

Have a great trading day, I’ll catch you tomorrow.”