am/fx: Short CADJPY

Subscriber-only

I like cross-JPY short here, and I like CADJPY short best.

by Brent Donnelly

December 29, 2022

Not very nice

Current Views

Short CADJPY @ 98.14

Stop loss 100.28

Take profit 93.28

December 29, 2022

Short CADJPY

Looks like it’s game on for the bullish JPY trade.

https://www.reuters.com/markets/asia/ex-boj-deputy-yamaguchi-emerging-next-cbank-head-contender-sankei-2022-12-29/

Some interesting information in there. A lean towards Yamaguchi is hawkish and it should also imply higher odds for Nakaso, too. If the vibes are towards ending Abenomics, as opposed to someone more incremental like Amamiya, that is definitely supportive of the JPY bull view for 2023.

There is also a tidbit in there on timing:

But Yamaguchi is attracting more attention as a strong candidate as Kishida’s administration distances itself from Abenomics, the Sankei said, adding that Kishida’s choice of new BOJ governor will become clear as early as next month.

The timing and entry point for short cross/JPY is much better now as we have rallied right into the big resistance and held perfectly. The resistance band marked by the old broken supports is 133.60/134.50 and the high so far has been 134.50.

USDJPY with old supports now marked as resistance band

The CADJPY chart is even cleaner:

CADJPY with old support now marked as resistance

I like the short CAD side better than short USD as the interest rate sensitivity of the Canadian economy is much higher than that of the US and doing CAD instead of USD gives you a bit of a buffer against a USD move. I don’t have a strong view on the broad USD into Q1 2023, so I prefer CADJPY shorts to USDJPY.

I am adding a short CADJPY to the Current Views. Keeping it nice and simple. Short here (98.14) with a stop at 100.28 and take profit at 93.28. Risking 200 to make 500, approx.