Two days ago I went short the USDJPY on the clear risk of correction, and I'll stick to the position as long as we remain below ¥90.20.
The temptation is to trail the stop lower as the pair has consistently traded down in the past two days of trading. Yet I'm not convinced we've convincingly broken down and will trail my stop if and when we trade below 87.80.
We've seen a slowdown in volatility across JPY pairs in the past 24 hours, and the long-awaited correction may indeed turn into mostly sideways price action. Yet I like the reward/risk profiles of USDJPY short positions against the high, and I'm staying short as long as we don't see a daily close above 90.20.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com To receive the Speculative Sentiment Index and other reports from this author via e-mail, sign up to David’s e-mail distribution list via this link.
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