FxWirePro: Glance through Yen’s portfolio restructuring – USD/AUD/JPY RV trades

JPY capped below 112.50 trend. CPI, PMI data due later, Japanese currency seems to be struggling momentarily against USD but holds key 112.60/65 area as BoJ maintains status quo in its monetary policy.

We could foresee yen’s strength in the medium run. How tackle bullish JPY: Stay short AUDJPY but rotate from options to cash
The slippage in the S&P this week was too little too late to make a dent in USDJPY and the put spread we had in the pair consequently expired OTM.

Nevertheless, it gave a kicker to AUDJPY, which was also hit by the further increases in Australian bank lending rates and what at times felt like proxy selling for further EM stress. 

As discussed in the introduction we believe AUD is vulnerable from an extension of the move in EM currencies and the slow bleed from US monetary policy (average earnings in this sense were a worrying development for high-beta FX), even if the bar for the market to price RBA rate cuts is high and a lot higher than in NZ seeing how the economy managed to grow 4% in 1H. 

Paid 36bp for a 1m 112.168/110USD put/ JPY call spread. 

Long a 3m AUDJPY put, strike 77.50, short a 3m AUDJPY 81.25-83.50 call spread. Received 0.5bps.

Sell AUDJPY in cash at 85.361 levels, stop 83.250. Courtesy: JPM

Currency Strength Index: FxWirePro's hourly NZD is inching at 84 (which is bullish), USD spot index is flashing at -124 levels (which is bearish), while articulating (at 12:39 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex