It has been recently noticed that the significant movement in Trans Pacific Partnership (TPP) negotiations in the field of trade agreements, Japan has been focusing on finalizing the TPP agreement by the spring of 2015. The foundation of this trade pact is the general accord between Japan and the US.
There are a few areas in the fields of agriculture and automobiles where negotiations have been prolonged between the two nations. With major cooperation by both countries on tariffs levels and import quotas may tend to attract more conducive environment for international traders.
Relaxation from Japan on tariffs for pork and beef and quotas for rice, while the US has weakened its push for automotive market deregulation, so far these are the major highlights of this trade pact between both countries.
On a technical standpoint we see some sort of downside pressures on USDJPY daily charts. Both Price and RSI (14) curve moving with downward convergence. And in addition fast stochastic suggests bearish trend to persist as redline cross over occurred at around 70 levels which indicates Yen's gains are healthy on USDJPY currency cross.
As we could foresee an intermediate downward trend on this we recommend buying Put Ratio Spreads to hedge the forex exposures.
Hedge through buying a Put Ratio Spread reduces risks on this downside pressure on dollar.
This is the combination of Bear Put Spread and naked puts. To construct this strategy, buying ATM Put and sell more puts at a lower strike price (usually ITM) in ratio of 1:2 or 1:3.
Short time to expiration is preferred to take advantage of time decay in short positions; the reason for this is more time to act on this position may go against your expectation due to uncertainty associated in the market. Margin is required to take short Put positions.
