Continue trading against the trend within an assumed USD/JPY range of ¥156.50–¥158.50. Although the market lacks direction amid the US-Japan interest-rate differential and intervention concerns, the strategy is to seek small profit opportunities within the range.
The market has continued to lack a clear direction in USD/JPY, with trading currently centered within the ¥156.50–¥158.50 range. The approach presented is to trade against the trend within the range, seeking profits through small trades while limiting risk.
Looking at IMM positioning, yen short positions were unwound after the coordinated US-Japan intervention at the end of July, and there was a period when yen long positions rose sharply. Yen long positions have since declined, and positioning is now considered close to neutral.
The US-Japan interest-rate differential has not changed significantly, while intervention concerns continue to cap the market's upside. Although expectations for rate hikes in the US and Japan are being priced in, strong concern over the possibility of intervention is restraining aggressive position-taking.
The proposed trading strategy is to set an assumed range and trade within it. Specifically, the basic range is ¥156.50–¥158.50, or 2 yen, with a target of 50–100 points per trade.