LONG USD/JPY

We can see a lot of big Japenese names buying USD this morning. This is usually a good indication of where this is going however, all bets are off if the carry trade goes into liquidation today.

Short selling EUR/JPY

Selling EUR/JPY on strength to 159.60/70 recent highs

EUR/JPY has recovered from an early week sell-off down to the 155.00 area, and is currently sitting just below key trendline resistance from the highs at 169.15, which comes in at 158.90-159.00. Just beyond that trendline resistance are the highest highs since the massive August sell-off at 159.60/70, and beyond that is the psychologically significant 160.00 level. Daily momentum studies are positive and still pointed higher, but 4-hour and hourly studies are in overbought territory and are showing bearish divergences, suggesting the upmove is now over-extended.

The strategy is to use current strength to establish a 50% short position at 158.70 and to sell the remaining 50% of the short position at 159.50, just short of the recent highs in case they're not reached, for an average short rate of 159.10. The stop loss is above the key round-number level of 160.00 at 160.20, for a total risk of 110 pips. The profit objectives are 50% at 157.25, which is support from broken hourly trendline resistance, and the remaining 50% is at 155.50, above the hourly lows seen at the start of this week.

This strategy is heavily dependent on market volatility returning in the near future, as continued calm (equity) markets support the case for carry trades being re-entered. Conservative traders might then want to wait for further technical confirmation, which would come with a drop below the hourly trendline that has guided EUR/JPY higher since the beginning of this week, which is currently at 158.30/40 and rising. Looking at US equity market charts, I see a bearish Harami Cross in the DJIA, which is a bearish reversal candlestick pattern after an upmove. If the pattern plays out, it suggests stock markets have stalled at the pre-NFP level and are unable to extend gains further, raising the of downside potential ahead. The likely catalysts for such a move are data (such as steady initial jobless claims on Thursday or stronger than expected US retail sales on Friday) that would reduce the amount or potential for a Fed rate cut next week.

SHORT AUD/USD

We are bullish dollar on GBP/USD and also AUD/USD. We are short 5 x 100k lots on GBP/USD for a move down to 199.50 and then again down to 194.50. We have bought a quick 3 x 10k lots for tonight's rate decision on AUS/USD due at 7:30pm EST... Markets are very choppy and carry trades are still moving the market in JPY crosses leading the way.

EUR/CHF

We are short on Eur/Chf and expect the swiss franc to take back gains from the Euro this week. We have entered the trade at a price of 1.6494 with a target of $164.05.

Expect trading desks to start talking about this slow subtle charge higher in EUR/JPY..The pair is within 1.7% of its all time high set back in March of 1998 right before a concerted intervention effort in USD/JPY gave the JPY a meteoric boost along the lines of 10 big figures higher in less than 2 trading days....Be on guard and don't miss this move if it happens

Short GBP/USD

We are short 5 lots of GBP/USD for a target 196.60.
Once the target has been hit we are long 5 lots with GBP going over 200.00 in the next 30-45 days.

eur/jpy

We have short sold 2 LOTS eur/jpy looking to buy back at 152.50

GBP/USD

We are short selling cable GBP/USD 2 LOTS. I am waiting for cable to fall to 190-191 before buying back.

BUYING US DOLLARS

You heard it here first--candlesticks suggest a sharp reversal higher in US equities today, which could easily prompt a sharp rebound in USD/JPY which is recovering from key daily trendline support at 116.70/80 amid rumors of semi-official Japanese buying interest there.

We are buying 70k in USD against JPY