Trend followers have had a windfall as the Yen has moved one way virtually uninterrupted in recent months shedding 13% since the beginning of October. While there have been a number of head fakes my feeling is that we could get a considerable bounce from current levels. There appears to be a triple bottom established in recent sessions just under 1.1100 in March futures. As one can see on the chart we are starting to see volatility pick up with wider ranges the last week. On a trade above the 20 day MA; identified by the dark blue line expect short covering to follow.
At this juncture I would not rule out a trade to $1.1600/1.1800 in a hurry…like 2-4 sessions once we get started. I do not suggest futures or selling options as this could be very unforgiving if the recent lows give way. The only play in my opinion is to buy inexpensive out of the money options looking for a considerable move and willing to lose the entire premium paid. If this happens it should play out in the next 2/3 weeks in my opinion.
One thing to consider is as the Yen has depreciated a number of risk markets…including many commodities and equities have appreciated. If in fact if we see a sharp spike higher in the coming weeks it would not surprise me to see a reversal albeit temporarily in risk markets. In other words stocks, metals and energies could back off short term. To take it a step further not to speak my trades but I like bearish exposure in the aforementioned markets for a trade lower in the coming weeks.