USDJPY went on autopilot

It seems like USDJPY steps over the perimeter of interests of investors, which means that the market goes on autopilot.

In general, we can say that JPY, as an asset, is quite investor-friendly now for options trading. It is because of the expectations of the growing price movements.

Basic arguments:

The closest forward rate indicates a negative trend, which reflects the continuation of this trend. From the fundamental point of view, as of the date of the forecast, the fair price is 108.19 Yen per US dollar. Moreover, strengthening of the Yen is justified by the interest rate. Also, the volatility significantly reduced, which means that there is a reason to expect a sharp movement and, consequently, the growth of the volatility.

So, we wait for a downward movement.

Technical arguments:

The current situation is very similar to a spiral of correction movement on a global chart of the USDJPY price. Moreover, the current price is very close to the value of the previous global resistance point, which was at 107.67 USDJPY. Also, the amplitude of the movement indicates that another attack of the resistance level is imminent just 6 months later.

Analysis of big traders' positions

Picture 1. A chart of the USDJPY price and the index of big traders for the period of 18.05.2019 - 18.06.2019.

As we can see in picture 1, there is a reducing number of positions and level of interest, which contribute to a downward trend.

Forecast:

According to all mentioned above arguments, we can conclude that the market expects a continuation of a downward trend. It will happen after a light correction.

We recommend you to use the following indicators for comfortable trading:

• RSI
• ROC

Positions: the optimal position to keep the level of risk moderate is: 2 trades up and 1 trade down.