Should Long Yen Position be Abandoned?

Should Long Yen Position be Abandoned?

22 April 2016, 15:41
Roberto Jacobs

Should Long Yen Position be Abandoned?

We think not.

Yen has taken beating since it failed to break resistance around 108 against Dollar, after earthquake devastated southern Japan’s Kumamoto region. Since that event failed to trigger any major risk aversion along with failure of Doha talks among oil producers’ Yen got further pushed back.

And today Yen is on its way to end the week, at weakest position of the whole week.

Naturally, the question do occur, should the long Yen position be abandoned?

We, will speak in context of our call.

We have shorted Yen around 118/119 area, with targets around 115, 111, 110, 108, 105, 102, 98 and 90. Four of our targets have reached, while four still remains.

So, one can go for some profit bookings, if you don’t wasn’t to face the uncertainties of what Bank of Japan may do next week, with large position.

But abandoning is definitely not recommended, let’s check the facts here –

  • Rumor has hit the market that BOJ will introduce negative rate loans, if it happens it may hurt Yen longs but only temporary. Dollar weakness and tensions of weakness in global economy should be sufficient to keep Yen well bid. In 2011, evidence clearly shows, even direct intervention hardly works, when Yen strengthens.
  • While China risks have eased after stimulus shot from the government, another risk is building up, which is much more severe that central banks are running out of tools.

We strongly expect, any actions from BOJ will open up the chance to go long in Yen at better price and any weakness to remain contained within 111.2, 112 and 115 resistance area.

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