High optimism on Japan among Asian nations likely to disappoint streets

Japan Machinery Orders: It is scheduled today to be announced April's orders of machinery; it would be reported by the cabinet office, Japan. Machinery orders in Japan have increased to 2.90% in March of 2015 over the previous month.

Tertiary Industrial activity: This number measures change in the total value of services purchased by businesses. It is printed at -1.0% for April comparing the same with previous at -0.4%. Businesses are quickly affected by market conditions and changes in their spending can be an early signal of future economic activity such as hiring, earnings, and investment.

IP revised numbers:: Industrial production in Japan decreased to 1.20% in March of 2015 over the same period in the previous year. It is reported by the Ministry of Economy Trade & Industry.

Technicals and Derivatives Insights: (USD/JPY)

Although it is a continued streak of sideway trend, a strong bullish candlestick pattern occurred with negative divergence on downward price curve which can be deemed as a trend reversal on daily trading perspective. We also see confirmation from stochastic as %D line crossover happens even though not below 20 levels but then a bullish slight sign on this pair. We foresee 118.793 as a strong support to test stiff resistance at around 120.294 levels.

Option strategy: Call Ratio Spread

As the trend direction has to be either sideways or slightly upwards, we advocate the Call Ratio Spread.

It is actually a combination of Bull Call Spread and naked Calls. The position construction should be with long on an ATM Call and short more Calls at a higher strike price (OTM contracts) usually in ratio of 1:2 or 1:3.

Short time for expiration is chosen to take advantage of time decay in short positions and not to give underlying currency much time to move higher.

Remember margin is required to take short call positions.