Something for your Espresso: USDJPY is back in line with fundamentals
Morning from Europe!
We observed an interesting minor reversal lower in USDJPY over the past session,
A few days ago, we took advantage of this by purchasing USDJPY and capitalizing on the subsequent spike.
Using this opportunity, we bought a USDJPY CALL 145 with an RKO 151, set to expire on September 5th, anticipating that USDJPY will stabilize within the 145-150 range once market conditions settle.
This anticipated range aligns with current real rates models projections. Unless a significant receiving party in USD rates emerges, we do not foresee the USDJPY trading below 145 again in the near term.
In other words, we consider the USDJPY trade mostly in line with fundamentals again, and the major gap between USDJPY and real rates that emerged in July is now closed.
Chart 1: USDJPY back in line with fundamentals
The USDJPY trade is back in sync with fundamentals and we expect it to range between 145-150 once the dust has fully settled. Meanwhile, both equities and fixed income trade at key levels.
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