DY: Japanese Yen Meltdown Produces Banner Week for Trading Strategies
EURJPY – An astounding reversal in the Japanese Yen following the Bank of Japan’s interest rate decision has led to a surge in retail crowd JPY buying (USDJPY, EURJPY selling); we favor Yen declines.
Trade Implications – EURJPY: Last week we wrote that our purely sentiment-based Momentum2 system was first to go short JPY and long USD from ¥95.60, EUR at ¥121.38, AUD from ¥99.32, and CHF at ¥101.25. We’ll admit that we were nervous switching direction so rapidly, but the subsequent surge in JPY cross rates has made for one of the best 7 days of performance in Momentum2 and our volatility-friendly Breakout2 system in recent memory.
Given that market volatility expectations remain elevated for the JPY and relative yields favor further weakness, we see little reason to shift from our USDJPY and EURJPY-bullish trading biases.
