FXStreet (Barcelona) – FX Strategists at TD Securities observe caution on USD/JPY longs, and suggest appropriate hedging strategies aligning with their defensive view.
Key Quotes
“The latest move to multi-year highs appears to have drawn considerable buying interest. This suggests a notable build-up of long USDJPY positions at what may prove to be unfavourable levels. We estimate the average entry point was 122.18 ahead of the climb to 125.86.“
“While still hesitant to call for a significant correction, we do think the risk of one is rising. In our view, a more defensive posture is warranted.”
“Investors should look to hedge or tighten strategic stops on long USDJPY positions as summer markets loom. Investors should enter 3M 25d/15d put spreads or the equivalent zero-cost 3M 25d/15d/15d ‘seagulls’ to position for a possible move lower.”
“Only a decisive move above 125.86 will negate this view as premature and put us back on a more bullish footing.”
(Market News Provided by FXstreet)